CERMANYS  HEtfWAR 
AGAINST  AMERICA 


STANLEY  FROST 


EXCHANGE 


GERMANY'S  NEW  WAR 
AGAINST     AMERICA 


GERMANY'S  NEW  WAR 
AGAINST   AMERICA 

BY 

STANLEY   FROST 

OF  The  New  York  Tribune 

With  an  Introduction  by 

HON.  A.  MITCHELL  PALMER 

ATTORNEY  GENERAL  o*  THE  UNITED  STATES 
FORMERLY  ALIEN  PROPERTY  CUSTODIAN 


NEW  YORK 
E.  P.  BUTTON  AND  COMPANY 

681  FIFTH  AVENUE 


COPYRIGHT,  1919 
By  E.  P.  DUTTON  &  COMPANY 

All  Ri&hts  Rtstntd 


3 


F7 


EXCHANGE 


Printed  in  the  United  States  of  America 


ISC. 


CONTENTS 


INTRODUCTION 


CHAPTER  PAGE 

I.  LAUNCHING  THE  INVISIBLE  WAR   ...  i 

II.    THE  NEW  HUN  PIRACY 23 

III.  THE  MACHINERY  OF  CONQUEST     .     .     .  ,33 

IV.  MOBILIZING  THE  NEW  ATTACK      ...  43 
V.  HIDING  BEHIND  THE  NEUTRALS     ...  54 

VI.  THE  HUNS'  TRADE  SPIES  IN  AMERICA     .  64 

VII.  GERMAN  ALLIES  IN  THIS  COUNTRY     .     .  74 

VIII.  DYES     AND     CHEMICALS  —  THE     HUNS' 

STRONGHOLD 82 

IX.  THE  GERMAN  METAL  OCTOPUS     .     .     .  109 

X.  TEXTILES — A  COLONIZED  INVASION     .     .  128 

XI.  WEAPONS  THE  HUN  HAS  LOST      ...  136 

XII.  SHIPPING — A  THREE-EDGED  MENACE       .  145 

XIII.  INSURANCE— ESPIONAGE  AT  A  PROFIT      .  154 

XIV.  THE  GATHERING  ASSAULT  ON  AMERICA  .  165 


00 

9        56 


LIST  OF  CHARTS 


PAGE 

THE  GERMAN  METAL  OCTOPUS: 

I.    Metall  Gesellschaft 116 

II.     Aron  Hirsch  und  Sohn «6 

III.  Beer  Sondheimer  &  Co 116 

IV.  The  American  Metal  Co.,  Ltd.,  and  Its 

Connections IJ6 


vii 


INTRODUCTION 

BY  A.   MITCHELL  PALMER 

Attorney  General  of  the  United  Stales,  Formerly  Alien  Property  Custodian 


AMERICAN  business  men  should  realize  the  great 
German  menace  that  is  now  confronting  them. 
Germany  has  mobilized  her  finance,  industry  and 
commerce  into  a  vast  army,  with  carefully  laid 
plans  for  a  commercial  war  that  will  be  as  serious 
a  menace  to  civilization  as  were  the  bloodthirsty 
hordes  of  the  Kaiser's  army  that  invaded  little  Bel- 
gium. Germany  has  been  defeated  on  the  battle- 
field, but  her  industrial,  financial  and  commercial 
army  is  intact.  Her  great  factories  and  workshops 
have  not  been  touched  by  the  war. 

Industrial  Germany  was  responsible  for  the  war. 
Industrial  Germany  sympathized  and  participated 
in  the  preparation  for  the  war,  and  when  defeat 
seemed  certain  it  was  industrial  Germany  that 
forced  the  military  peace  in  order  that  with  her  in- 
dustrial equipment  intact  she  might  continue  the 
same  war  by  intensified  and  concentrated  economic 

ix 


x  mTRODUCTION 

measuresT  The  Germany  of  to-day  is  not  a  whit 
different  from  the  Germany  of  five  years  ago.  Her 
ambitions  are  the  same ;  her  methods  are  the  same ; 
her  destinies  are  in  the  hands  of  the  same  group  of 
men  who  began  the  war  and  who  prosecuted  it  so 
ruthlessly. 

With  her  factories  and  workshops  intact  and 
mobilized  with  her  finance  and  commerce,  Germany 
is  prepared  to  attack  the  United  States  in  a  com- 
mercial war  in  the  hope,  not  alone  of  regaining  the 
markets  lost  by  the  war,  but  of  extending  her  trade 
and  business  on  a  much  larger  scale.  For  many 
years  Germany  has  by  "peaceful  penetration" 
sought  to  dominate  the  principal  industries  of  this 
country.  In  many  industries  the  Germans  were  suc- 
cessful. My  experience  as  Alien  Property  Cus- 
todian convinced  me  that  the  industrial  invasion 
of  America  by  the  German  interests  for  many  years 
before  the  war  was  begun  with  hostile  intent.  It 
was  destined  to  capture  the  trade  and  business  of 
this  continent  when  the  day  should  come  that  Ger- 
many felt  strong  enough  to  pit  her  armed  forces 
against  the  civilized  world.  Germany's  method  of 
upbuilding  industry  in  this  country  was  not  the 
method  of  ordinary  investors  of  capital,  but  the 
method  of  distributors  of  propaganda.  Many  of 
the  German-owned  industrial  concerns  here  were 


INTRODUCTION  xi 

mere  spy  centers  before  the  war,  and  would  have 
been  centers  of  sedition  if  we  had  not  promptly 
taken  them  into  our  possession. 

German  plans  for  the  coming  commercial  war- 
fare have  been  framed  with  the  greatest  skill. 
While  the  German  hordes  were  fighting  on  the  bat- 
tlefields, German  economists,  bankers  and  business 
men  were  scheming  and  plotting  for  the  day  when 
the  war  should  end,  so  that  Germany  would  be  pre- 
pared to  send  her  agents  broadcast  throughout  the 
world  and  begin  anew  a  commercial  warfare,  by 
which  Germany  hoped  to  secure  control  of  the  mar- 
kets of  the  world.  German  agents,  with  their  same 
old  tricks  and  a  few  new  ones,  are  ready.  Ameri- 
can business  men  know  what  these  tricks  are.  De- 
stroy business  competitors  by  state  aid,  cartel  com- 
bination, dumping,  full-line  forcing,  bribery,  theft 
of  patents  or  inventions,  espionage  and  propaganda! 
Nothing  is  too  unscrupulous  for  these  German 
agents  to  use  in  their  efforts  to  regain  German 
trade. 

The  dye  industry  is  one  of  the  industries  through 
which  Germany  hopes  to  regain  her  world  trade. 
It  is  Germany's  chief  protective  industry.  She 
would  never  have  started  this  war  had  it  not  been 
for  her  highly  developed  dye  industry,  through 
which  she  was  enabled  over  night  to  turn  her  dye 


xii  INTRODUCTION 

factories  from  their  peacetime  occupation,  into  the 
making  of  high  explosives  and  noxious  gases,  which 
killed  so  many  of  our  gallant  boys  on  the  battlefields 
of  France. 

Germany  believes  that  America  must  have  Ger- 
man dyes.  She  thinks  that  we  cannot  get  along 
without  them.  She  is  looking  to  the  dye  industry 
as  her  chief  weapon  on  the  economic  battlefields  of 
this  country,  and  expects  through  it  to  make 
American  manufacturers  the  slaves  of  Germany. 
I  do  not  think  the  American  manufacturer 
wants  to  return  to  pre-war  conditions.  We  had  no 
dye  industry  then  and  he  was  solely  dependent 
upon  the  Germans  for  dyestuffs.  We  were  also  de- 
pendent upon  the  Germans  for  some  of  our  most 
important  medicines,  such  as  salvarsan  and  luminal. 
Things  have  changed,  however,  and  we  now  have  a 
very  healthy  dye  industry  in  this  country.  We  are 
also  making  many  of  the  important  remedies  for 
which  we  were  formerly  dependent  upon  Germany. 
It  is  essential  that  the  American  consumers  of  dyes 
support  this  industry.  It  is  essential  that  America 
have  a  highly  developed  dyestuff  industry ;  first,  be- 
cause of  its  importance  to  the  industries  of  the 
country  (more  than  three  billion  dollars  of  Ameri- 
can products  being  dependent  upon  it) ;  second,  be- 
cause of  its  necessity  for  national  defense  (for  use 


INTRODUCTION  xiii 

in  the  making  of  high  explosives  and  gases)  ;  and 
third,  for  the  development  of  research  work  for  the 
discovery  of  curative  medicines  for  some  of  our; 
most  fatal  diseases. 

At  my  suggestion  the  Chemical  Foundation,  Inc., 
was  organized  and  purchased  the  4,500  German- 
owned  dye  and  pharmaceutical  patents  in  this  coun- 
try. This  concern  is  in  the  control  of  a  Board  of 
Trustees,  consisting  of  Otto  T.  Bannard  of  New 
York  City,  Cleveland  H.  Dodge  of  New  York, 
George  J.  Ingraham,  late  Presiding  Justice  Appel- 
late Division,  New  York  Supreme  Court;  Ralph 
Stone  of  Detroit,  and  B.  H.  Griswold  of  Baltimore. 
The  Chemical  Foundation  proposes  to  license  the 
use  of  these  German-owned  patents  to  American 
concerns  on  an  equal  footing.  Practically  all  of  its 
income  will  be  devoted  to  research  work  and  the 
upbuilding  of  the  dyestuff,  chemical  and  phar- 
maceutical industry  in  this  country. 

We  are  doing  our  part  to  make  America  com- 
.mercially  free.  I  believe  that  American  business 
tmen, will  join  with  us. 

« A.. MITCHELL  PALMER.. 


GERMANY'S  NEW  WAR 
AGAINST     AMERICA 


GERMANY'S 
NEW  WAR  AGAINST  AMERICA 


CHAPTER  I 
LAUNCHING  THE  INVISIBLE  WAR 

ATTACK    BEGUN    BEFORE    ARMISTICE    WAS    SIGNED 

THE  PLOT  TO  GAS  THE  WORLD'S  TRADE GER- 
MAN RESOURCES  ALMOST  UNIMPAIRED THE 

OLD  GANG  STILL  IN  POWER  BEHIND  REVOLU- 
TIONARY AND  BOLSHEVIST  CAMOUFLAGE — POS- 
SIBLE MEASURES  OF  DEFENSE — AMERICA 
MARKED  AS  FIRST  VICTIM 

GERMANY  has  already  declared  an  invisible  war. 
She  had  elaborately  planned  to  do  so.  Before  the 
ink  was  dry  on  the  armistice 

German  agents  were  in  Italy  taking  orders  for 
goods  at  50  per  cent  below  the  market  prices. 

German  agents  were  in  Holland  and  Scandinavia 


2  GERMANY'S  NEW  WAR 

offering  goods  giiararittjed  to  be  so  camouflaged  that 
neutral^  :  could-  sell  them,  to, anti-Germans  as  their 
own  manufacture  and  :at 'cut 'prices. 

German  agents  were  in  Spain,  guaranteeing  de- 
livery within  six  months  at  cut  prices,  of  any  goods, 
whether  previously  sold  by  Germany  or  not. 

German  agents  were  waiting  by  the  thousands 
in  Switzerland  for  word  to  begin  the  invasion  of 
Allied  countries. 

Thus  even  before  the  old  war  ended  the  enemy 
began  the  War-After-the-War.  While  the  Allies 
have  been  almost  in  panic  over  the  specter  of  Bol- 
shevism in  Germany  the  German  trader  has  been 
attacking  Allied  trade. 

In  this  new  war  they  have  struck  not  hap- 
hazardly, but  with  deep  preparation.  They  have  a 
well-drawn  plan  of  campaign  inspired  by  Teuton 
cunning  and  treachery.  They  have  intact  a  world 
machine  for  aggression  and  propaganda.  They  have 
an  industrial  equipment  which  is  actually  stronger 
than  before  the  war. 

Has  New  Alliance  Against  the  World 

The  alignment  is  of  Germany,  with  such  of  Rus- 
sia and  Southeastern  Europe  as  she  and  her  Bol- 


LAUNCHING  THE  INVISIBLE  WAR        3 

shevik  friends  and  hirelings  can  control  against  the 
world. 

The  purpose  is  to  win  for  Germany,  by  commer- 
cial, industrial  and  economic  aggression,  the  world 
supremacy  that  she  could  not  win  by  arms,  and 
incidentally  to  make  the  nations  that  defeated  her 
pay  the  indemnities  she  owes  the  world. 

The  strategy  is  to  place  comparatively  small 
funds  in  positions  of  power  in  the  business  life  of 
other  nations,  and  from  this  leverage  to  reap 
further  power  and  enormous  profits. 

The  tactics  are  the  same  that  have  shocked  and 
revolted  the  world  for  the  last  five  years — broken 
faith,  deceit,  propaganda,  espionage,  every  kind  of 
dishonesty  and  indecency,  combined  with  such 
scientific  organization  as  will  throw  the  whole 
power  of  the  entire  German  world  against  any  weak 
spot  that  her  leaders  may  detect,  and  such  dip- 
lomacy as  will  prevent  the  world  from  rallying  ade- 
quate force  at  that  spot  to  resist  her. 

Deadly  Weapons  Under  Camouflage 

The  menace  is  no  more  a  nightmare  than  the  fear 
of  her  coming  armed  assault  of  the  world,  the 
fear  that  was  laughed  down  in  1913,  was  a  night- 


4  GERMANY'S  NEW  WAR 

mare.  It  is  somewhat  covered  by  diplomacy,  as 
her  ambitions  as  a  conqueror  were  then  covered, 
but  it  is  avowed  at  home  as  frankly  as  Treitschke 
and  Bernhardi  avowed  the  coming  Prussian  piracy. 
The  strength  she  is  gathering  is  camouflaged  with 
disorder  and  apparent  weakness,  but  there  are 
deadly  weapons  under  the  camouflage. 

The  great  war  took  the  world  by  surprise  because 
the  world  did  not  believe  what  the  German  leaders 
— intellectual,  political  and  commercial — said.  Pan- 
Germanism,  world  conquest,  even  the  rape  of  Bel- 
gium, had  been  discussed  and  advocated  by  men 
to  whom  Germany  looked  up  and  who  were  recog- 
nized spokesmen.  In  the  same  way  the  coming 
campaign  for  world  dominion  through  commerce 
is  as  frankly  avowed. 

Its  best,  most  efficient  and  most  kultured  exposi- 
tion has  been  given  to  us  in  a  little  book  by  S. 
Herzog,  one  of  the  greatest  of  German  consulting 
engineers  and  a  man  easily  fit  to  rank  in  his  own 
line  with  Bernhardi.  This  book  obviously  was  not 
intended  for  circulation  outside  Germany,  but  a 
copy  has  been  secured,  translated  into  English  and 
published  by  Doubleday,  Page  &  Co.  Herzog's  title 
is  "The  Future  of  German  Industrial  Exports." 


LAUNCHING  THE  INVISIBLE  WAR        5 

Conspiracy  of  Fraud,  Declares  Hoover 

rA.n  introduction  for  this  was  written  by  Herbert 
C.  Hoover,  Vernon  Kellogg  and  Frederic  C  Wal- 
cott,  and  it  summarizes  startlingly  the  opinion  of 
these  men  on  the  German  menace: 

"If  there  is  anything  to  be  gained  by  being 
honest,  let  us  be  honest;  if  it  is  necessary  to 
deceive,  let  us  deceive."  Thus  wrote  Frederick 
the  Great  in  the  middle  of  the  eighteenth  century 
— the  man  who  laid  the  foundation  for  pan-Ger- 
manism, which  this  world  war  was  expected  to 
achieve.  Not  content  with  dominion  by  force  of 
arms,  we  find  Germany  plotting  for  commercial 
supremacy  with  that  insolent  disregard  of  the 
rights  of  others  and  that  resort  to  deception  that 
have  characterized  all  her  policies  since  Frederick 
the  Great's  reign.  .  .  .  Like  all  of  Germany's 
plans  affecting  other  nations,  the  entire  concep- 
tion depends  upon  deceit  and  superselfishness ; 
not  one  word  touching  upon  reciprocity,  not  one 
word  in  recognition  of  any  international  obliga- 
tions. 

It  was  obviously  written  exclusively  for  home 
consumption  and  not  intended  for  those  outside 
the  iron  circle.  It  should  be  a  warning  to  us. 
We  should  study  it  with  care  and  keep  our  eyes 
and  ears  alert  for  other  warnings  of  the  sort, 
that  in  peace  we  may  be  prepared  to  meet  this 
design  of  commercial  rapine,  this  crushing  of  the 
industries  of  other  countries. 


6  GERMANY'S  NEW  WAR 


Germany  Inherently  A  Dishonest  Nation 

.  .  .  deception  and  fraud  form  the  back- 
ground of  their  most  important  international 
relations  and  undertakings.  They  have  made  of 
Germany  an  inherently  dishonest  nation. 

Now  another  conception  comes  out  of  the 
heart  of  Germany,  that  threatens  the  commercial 
interests  of  unsuspecting  nations — carefully 
thought  out,  with  characteristic  German  thor- 
oughness, openly  advocating  the  breaking 
down  of  all  business  ethics,  relying  upon 
trickery  and  circumvention  to  gain  their  end. 
This  promises  to  stop  at  nothing,  from  national 
dumping  of  goods  to  crush  competition,  to  false 
labels  and  disguise  of  the  origin  and  the  break- 
ing of  contracts  that  prove  disadvantageous  to 
the  German. 

Let  the  manufacturing  and  banking  interests 
and  the  laboring  and  professional  classes  of  all 
nations  be  warned  in  time  to  devise  antidotes 
and  counter  attacks  to  the  Machiavellian  devices 
of  a  class  gone  mad  with  lust  of  conquest,  de- 
liberately plotting  to  fatten  itself  on  the  life- 
blood  of  other  nations  even  after  the  war.  Let 
us  consider,  in  making  peace,  what  protection  we 
can  give  to  the  commercial  existence  of  the  freed 
nations. 

That  is  Herbert  Hoover's  opinion  of  the  German 
menace. 
The  Herzog  plan,  stupefying  in  its  frank  rapa- 


LAUNCHING  THE  INVISIBLE  WAR        7 

city,  is  simply  the  perfection  of  the  organization 
which  grew  up  during  the  wonderful  German  ex- 
pansion of  the  last  few  decades,  a  perfection  toward 
which  Germany  has  moved  fast  during  the  war 
and  has  now  almost  attained.  It  combines  amaz- 
ingly with  the  principles  advocated  by  leading  Ger- 
man Socialists. 

The  state  is  to  take  full  control  of  industry.  It 
is  to  determine  what  business  and  profits  each  may 
have  and  to  have  power  to  assign  men  willy-nilly 
to  industries,  to  hold  them  there  under  a  military 
discipline  and  prevent  their  deserting  to  any  other 
job  or  to  another  country.  The  whole  machine  is 
to  be  under  control  of  a  commercial  general  staff. 

This  staff,  covering  the  world  with  spies,  is  to 
decide  how  much  of  each  German  product  each 
nation  should  consume  and  at  what  prices,  and  how 
much  of  its  own  products  it  should  sell  Germany 
and  at  what  prices.  Germany  is  to  be  the  sole 
judge. 

If  a  country  rebels,  if  the  people  will  not  buy 
or  sell  to  Germany  at  the  prices  and  in  the  amounts 
assigned,  punishment  is  to  follow. 

Germany  will  select  certain  industries — like  the 
dyestuff  trade  or  potash  fertilizers  or  vitally  needed 
medicines — which  she  can  absolutely  control  and  of 


8  GERMANY'S  NEW  WAR 

which  she  will  have  a  carefully  protected  world 
monopoly,  competition  in  other  countries  being 
beaten  down  by  scientific  "dumping."  When  com- 
mercial war  is  declared  she  will  refuse  to  sell  these 
"protective  products"  to  the  offending  nation,  main- 
taining the  boycott  till  the  other's  industries  are 
crippled  and  she  is  forced  to  surrender.  The  whole 
German  commercial  world  is  to  be  assessed  to  pay 
the  campaign  expenses,  and  when  the  commercial 
war  is  won  is  to  be  reimbursed  from  the  heavy 
indemnities  to  be  exacted.  Thus  the  whole  power 
of  the  German  organization  can  be  thrown  instantly 
against  any  single  point  in  the  world. 

This  system  is  to  be  buttressed  in  every  possible 
way.  German  inventions  are  to  be  kept  secret — 
others  are  to  be  stolen.  Trademarks  are  to  be 
pirated  and  neutrals  used  to  hide  the  German  origin 
of  goods.  German  commercial  travelers  are  to  go 
disguised  as  of  other  nationalities.  Surplus  stocks 
of  goods  are  to  be  created  and  held  for  dumping 
purposes. 

The  transplanting  of  German  industries  or  work- 
men to  foreign  soil  is  to  be  prohibited,  except  the 
highly  trained  scientists  and  engineers,  who  are  to 
go  as  spies,  propagandists  and  corrupters.  A  world 
propaganda  is  to  be  maintained. 


LAUNCHING  THE  INVISIBLE  WAR        9 

Germany's  Actions  Fit  Into  the  Plan 

Treaties  are  to  be  made  and  broken  at  will.  The 
most  intensive  training  is  to  be  provided.  Genius 
of  all  kinds  is  to  be  drafted  and  possessors  of  trade 
secrets  are  to  live  in  virtual  imprisonment. 

Every  state  power,  the  tariff,  government  patron- 
age, diplomacy,  law,  financial  and  railroad  con- 
trol, is  to  be  used  in  any  possible  way. 

As  with  Bernhardi's  prophecies  of  rapine,  so 
with  this — the  German  acts  agree  with  theory. 
Much  of  the  Herzog  machine  had  been  constructed 
before  the  war  and  a  constant  growth  was  going 
on.  Already  the  German  commercial  threat  had 
become  a  marvel  of  the  business  world.  Already 
commercial  espionage  had  covered  the  globe  and 
dumping  as  a  trade  weapon  instead  of  a  relief  for 
home  congestion  had  become  a  scientifically  con- 
trolled practice.  Already  the  German  tentacles 
were  reaching  out  into  other  nations  and  the  care- 
ful strategic  location  of  these  investments  has  been 
an  almost  stunning  surprise  to  the  men  who  have 
been  digging  them  out  since  the  war.  Already  the 
whole  German  commercial  machine  was  being  or- 
ganized to  support  each  individual  export  scheme 
with  money,  advantages  and  power. 


10  GERMANY'S  NEW  WAR 

A  single  instance  of  this  will  show  how  the  whole 
thing  worked — and  this  was  before  the  war.  When 
America  put  a  new  tariff  on  a  German  product 
the  German  government  would  grant  rebates  on 
the  freight  rates,  which  would  offset  the  tariff, 
and  let  the  German  stuffs  come  on  equality  or 
better,  usually,  into  the  American  market.  Money 
premiums,  or  designedly  profitable  government 
contracts,  were  provided  in  other  cases.  Al- 
ways, Germany  was  ready  to  use  her  power  and 
wealth  as  a  whole  to  permit  any  particular  German 
product  to  overrun  all  barriers  and  meet  any  foreign 
product  in  its  home  market  at  a  price  that  would 
crush  competition  until  in  the  end  the  German 
product,  unopposed,  could  be  sold  at  tremendous 
profit. 

So  successful  had  this  been  that  when  the  war 
opened  it  is  estimated  that  Germany  had  invest- 
ments totalling  $9,000,000,000  in  foreign  countries, 
and  this  mostly  in  strategic  positions  and  strategic 
industries,  rather  than  merely  in  dividend  gathering 
securities.  She  controlled  the  dyes  and  chemicals 
of  the  world,  she  controlled  the  whole  metal  in- 
dustry, except  for  iron  and  a  few  American  metal 
companies,  and  was  stretching  out  for  these.  She 
controlled  potash,  an  indispensable  fertilizer.  She 


LAUNCHING  THE  INVISIBLE  WAR      11 

had  the  best  optical  glass  and  surgical  instruments. 
She  was  using  her  scientists  as  spies  and  even 
planting  industries  solely  for  espionage  purposes. 
She  was  cutting  into  the  textile  business,  beginning 
with  wool  and  lace.  The  machine  was  working 
and  was  having  a  huge  success. 

Machine  Strengthened  Even  During  Wai 

Since  the  war  this  machine  at  home  has  been 
strengthened. 

The  chemical  industries,  which  were  formerly  in 
three  cartels  (the  German  form  of  export  trust 
which  had  developed  into  its  most  effective  trade 
body),  have  now  been  entirely  consolidated. 

At  least  four  great  exporting  unions  have  been 
formed  to  push  German  foreign  trade  with  a  back- 
ing such  as  has  never  been  given. 

Neutral  firms  and  trademarks  have  been  bought, 
subsidized  or  coerced  for  use  as  disguises. 

Great  quantities  of  certain  goods — dyes,  potash 
and  probably  steel  products — have  been  gathered 
for  dumping,  while  raw  materials  are  ready  to  be 
sent  into  Germany  to  start  her  mills  or  to  be  thrown 
onto  the  world  market  to  manipulate  prices  for  her 
benefit. 


12  GERMANY'S  NEW  WAR 

In  fact,  of  all  the  Herzog  scheme  little  remains 
to  be  done  but  to  make  the  final  concentration  of 
power,  to  organize  the  general  staff,  so  to  speak, 
and  to  tighten  the  screws  of  discipline.  The  Her- 
zog plan,  in  all  essential  features,  could  be  com- 
pleted in  a  matter  of  weeks. 

Russia  Offers  Chance  to  Recoup  All  Losses 

In  addition,  as  preparation  for  the  trade  war, 
Germany  has  struck  deep  into  Russia — how  deeply 
is  not  yet  known,  for  the  "open"  diplomacy  of  the 
Bolshevists  left  certain  unpublished  paragraphs  in 
the  Brest-Litovsk  treaty.  But  throughout  Russia, 
where  even  before  the  war  practically  all  banking 
and  production  were  managed  by  Germans,  German 
capital  has  been  and  is  to-day  buying  up  the  in- 
dustries which  were  ruined  by  their  Bolshevik 
friends.  More  than  200,000  German  agents  are 
declared  to  be  in  Russia,  where  all  other  foreigners 
are  barred.  Ambassador  Francis  declared  publicly 
recently  that  unless  this  were  stopped  the  world 
would  learn  in  ten  years  that  Germany  had  won  the 
war  and  the  Allies-  lost  it.  Now  the  Bolshevik  rule, 
and  with  it  the  German  power,  is  extending  through 
Hungary.  No  wonder  the  Germans  are  not  sur- 
rendering their  Mitteleuropa  dream. 


LAUNCHING  THE  INVISIBLE  WAR      13 

The  first  weapon  of  all  German  plans  is  propa- 
ganda. Many  thousands  of  the  Huns*  most  skillful 
agents  have  been  interned,  and  to-day  the  German 
schemes  are  still  suffering  from  lack  of  their  abili- 
ties. When  peace  is  signed  that  will  be  ended.  The 
great  foreign  espionage  and  propaganda  system  will 
be  restored  almost  intact,  and  particularly  so  in  this 
country,  where  there  have  been  no  executions  of 
German  agents  and  few  sentences  that  amount  to 
more  than  a  few  years.  Bombers,  bribers,  liars, 
spies,  all  will  be  back  in  their  accustomed  places 
before  our  boys  are  home  from  the  Rhine.  There 
is  a  plan  to  deport  many  of  them,  but  even  during 
the  war  our  border  was  constantly  being  crossed  by 
known  German  agents. 

Before  the  war  the  German  Foreign  Office  in 
the  Wilhelmstrasse  was  the  real  center  of  German 
foreign  trade.  It  is  so  to-day,  and  from  it  are 
coming  the  diplomacy  and  propaganda  that  can  best 
serve  Germany  for  her  commercial  campaign.  To 
save  her  ships,  to  save  her  colonies,  to  save  her 
coal  and  iron  fields,  to  keep  from  having  to  return 
the  machinery  stolen  from  Belgium  and  France  and 
Poland,  to  get  assurance  of  raw  materials — this 
has  been  the  German  diplomacy  through  the  last 
few  months.  Commercial,  every  line  of  it 


14  GERMANY'S  NEW  WAR 

Behind  the  camouflage  the  same  German  spirit 
shows.  "You  cannot  expect  the  Germans  to  go  to 
bed  monarchists  and  wake  up  republicans,"  said  a 
famous  liberal  Vienna  editor  recently.  "The  old 
government  is  still  working,"  said  Kurt  Eisner,  a 
real  Socialist,  shortly  before  he  was  murdered. 
"The  old  gang  remains  in  power,"  writes  Frank 
H.  Simonds.  "The  leaders  of  the  National  As- 
sembly are  the  men  who  echoed  and  re-echoed  the 
militaristic  ideas  during  four  years  of  war. 
Bureaucracy  is  not  changed.  It  continues  to  func- 
tion, its  sympathies  are  all  with  the  old  order." 

Old  Imperialist  Gang  Remains  in  Power 

Run  down  the  list  of  the  men  in  power: 

Ebert,  the  Kaiser's  jackal  for  the  betrayal  of 
Russia. 

Erzeberger,  another  of  that  pack. 

Scheidemann,  an  open  tool  of  imperialism  and 
betrayer  of  his  fellows. 

BernstorrT,  on  whom  no  comment  is  needed. 

Dr.  Albert,  father  of  a  million  lies  on  our  soil. 

And  so  on! 

German  socialism  itself,  supposing  it  should  rule, 
has  in  it  nothing  that  would  make  it  less  willing 


LAUNCHING  THE  INVISIBLE  WAR      15 

to  strike  for  commercial  imperialism,  provided  the 
proletariat  got  the  benefit.  Not  a  move  has  been 
made  to  bring  under  control  or  to  modify  in  power 
or  aggressive  purpose  the  great  machine  built  under 
the  Kaiser  for  commercial  invasion.  The  German 
Socialist  preaches  a  new  kind  of  control  of  the 
government,  but  nothing  of  a  government  of 
liberty.  He  wants  a  state  that  rules  every  detail 
of  life  even  more  than  did  the  Kaiser* s,  a  socialized 
autocracy,  a  popularized  Prussianism,  but  still  the 
old  Prussian  autocracy,  only  with  ballots  instead  of 
Gott  to  select  the  autocrat. 

Old  Dishonesty  Now  Even  Worse 

The  old  dishonesty  is  there — worse,  if  anything. 

"One  fact  seems  to  be  established  by  all  wit- 
nesses," Simonds  reports.  "Germany  is  ... 
morally  bankrupt.  The  German  dishonesty  which 
showed  itself  in  lying  and  stealing  on  a  grand  scale 
during  the  war  is  now  become  chronic  in  the  small- 
est circumstances  of  life." 

Germany's  own  economic  machinery  is  not  only 
intact — it  has  been  strengthened  during  the  war. 
It  is  in  far  better  condition  to-day  than  that  of  any 
other  country,  except  possibly  England  and 


16  GERMANY'S  NEW  WAR 

America.  It  has  suffered  nothing  from  warfare. 
It  has  been  reinforced  by  the  machines  looted  from 
Poland,  France  and  Belgium,  while  in  all  the  coun- 
try where  the  German  hordes  have  been  there  has 
been  destruction  that  has  been  aimed  solely  at 
economic  crippling  of  a  future  competitor.  Ger- 
many's war  debt  is  to  her  own  people,  and  can  be 
repudiated  if  she  wishes.  In  spite  of  the  losses 
of  war,  she  has  a  tremendous  force  of  skilled  labor. 
She  has  been  gathering  vast  stores  of  raw  materials. 
In  Switzerland  alone  there  are  30,000  bales  of  raw 
cotton  waiting  the  signing  of  peace  to  be  shipped 
in  to  start  the  German  spindles  and  looms,  and  in 
South  America  are  millions  of  dollars'  worth  of 
wool.  The  machine  is  not  running,  but  it  is  intact. 

Measures  Taken  to  Meet  Menace 

The  governments  of  the  Allied  nations,  and 
especially  of  America,  and  the  business  men  of 
neutral  nations,  have  not  been  idle  in  the  face  of 
this  menace.  Many  measures  have  been  taken  to 
meet  it;  more  are  in  contemplation.  The  war  has 
developed,  it  has  forced  the  development,  in  many 
countries,  of  industries  which  meet  the  German  on 
his  chosen  ground.  It  has  aroused  the  attention 
of  the  world  to  the  danger.  War  measures  have 


LAUNCHING  THE  INVISIBLE  WAR      17 

gone  far  to  destroy  the  German  machine  outside 
of  Germany  itself.  Following  are  the  leading 
points  which  stand  to  the  credit  of  the  Allies  and 
of  America  in  the  coming  war: 

The  Saar  Valley  field  contains  18  per  cent  of 
Germany's  coal,  60  per  cent  of  her  iron,  and  enough 
potash  to  supply  the  world  when  developed.  If 
the  entire  Saar  field  goes  to  France  under  the  peace 
treaty,  Germany  will  have  been  struck  a  crippling 
blow. 

America  has  developed  a  supply  of  potash  that 
is  now  able  to  care  for  about  30  per  cent  of  her 
own  needs,  and  that,  experts  believe,  if  given  pro- 
tection, can  supply  the  world  in  five  years. 

In  England,  France,  Italy  and  America  hundreds 
of  millions  in  German  property  has  been  seized  and 
sold  to  loyal  citizens.  The  fabric  of  the  invading 
octopus  has  been  torn  to  pieces.  In  South  America, 
too,  through  the  use  of  the  war  powers,  German 
business  has  been  badly  crippled.  But  this  has  no- 
where been  quite  complete,  and  there  are  great  frag- 
ments of  the  octopus  left,  ready  to  function  again. 
Nor  has  any  adequate  scheme  been  devised  for  pre- 
venting the  prompt  reconstruction  of  the  machine, 
as  fast  as  American  or  Allied  citizens  can  be  tempted 
by  greed  or  duped  by  conspiracies. 


18  GERMANY'S  NEW  WAR 


To  Clinch  the  Dye  Industry 

In  the  dye  industry,  a  key  to  the  great  textile 
trade,  and,  with  its  by-products,  to  the  whole  drug 
trade  and  the  basis  of  explosives  and  of  war  itself, 
both  Britain  and  America  have  made  great  strides. 
In  these  the  elimination  of  the  German  agents  has 
been  far  from  complete,  but  Francis  P.  Garvan, 
United  States  Alien  Property  Custodian,  has  de- 
vised a  plan  for  pooling  the  patents  seized  from  the 
Germans  which  should  give  America  a  great  degree 
of  protection  during  the  years  needed  to  get  our 
industry  on  its  feet.  With  a  bar  against  German 
imports,  which  he  is  trying  to  get,  it  is  believed 
that  America  can  be  made  safe  on  this  line. 

In  regard  to  optical  glass,  recent  inventions  in 
America  have  made  it  certain  that  this  country  can 
produce  a  world  supply,  if  the  industry  again  can 
be  given  a  chance  to  develop  itself. 

Much  of  the  German  property  has  escaped  seizure 
by  being  transferred  to  neutrals,  who  hold  it  as 
"cloaks"  for  the  German  owners.  A  plan  has  been 
formed  for  an  inter-Allied  agreement  to  impose  so 
heavy  a  tax  on  the  retransfer  of  these  properties 
as  to  cripple  them  seriously,  or  else  force  the  Ger- 


LAUNCHING  THE  INVISIBLE  WAR      19 

mans  to  continue  doing  business  in  a  roundabout 
and  costly  way. 

It  has  been  found  that  by  restrictions  on  ship  fuel 
and  supplies — "bunker  licenses" — all  shipping  can 
be  brought  under  almost  full  control  of  any  agree- 
ment made  between  America  and  Great  Britain. 
This  can  be  used  to  prevent  any  revival  of  the 
German  merchant  marine.  England  has  under  dis- 
cussion the  adoption  of  this  scheme  by  herself, 
which  she  could  use  single-handed  to  bar  Germany 
from  the  Orient  and  from  all  but  the  Mediterranean 
coast  of  Africa. 

Vast  amounts  of  information  have  been  gathered 
by  the  intelligence  service  of  the  Allied  and 
American  governments,  which  are  available  to  their 
officials,  and  could,  if  desired,  be  put  at  the  disposal 
of  their  business  men  as  a  trade  weapon. 

Hun  Looks  Toward  America 

It  is  toward  America,  the  greatest  market  in 
the  world  and  the  least  protected — except  Russia — 
that  Germany  is  chiefly  turning  her  eyes.  Her  at- 
tempts to  divide  us  from  the  Allies  are  notorious. 
Her  propaganda  has  centered  here  and  it  showed 
a  great  revival  immediately  the  armistice  was 


20  GERMANY'S  NEW  WAR 

signed.    Men  who  had  escaped  internment,  Viereck 
and  his  ilk,  suddenly  became  vocal. 

"The  day  is  not  far  off,"  wrote  Viereck  in  De- 
cember, "when  the  United  States  of  America  can 
freely  salute  the  United  States  of  Germany,  and 
The  Star  Spangled  Banner'  will  wave  side  by  side 
with  the  red,  black  and  gold  of  our  new  sister  re- 
public." "Germany  is  still  unbeaten,"  he  said  in 
the  same  article.  "The  avowed  purpose  of  our 
Tories  to  keep  Germany  in  economic  subjection  is 
contrary  to  the  spirit  and  to  the  letter  of  our  Presi- 
dent's fourteen  points." 

Hundreds  of  Millions  Still  Unseized  Here 

Thus  to  Americans  in  particular  is  the  German 
menace  important,  since  we  seem  singled  out  for 
the  first  attack.  America  has  seized  some  three- 
quarters  of  a  billion  of  German  property,  but  an 
amount  perhaps  as  great  has  not  been  seized.  Mr. 
Garvan  is  confident  that  most  of  the  active  capital 
has  been  taken  in,  but  he  has  been  unable  to  touch 
the  millions  invested  in  stocks,  for  the  fact  that 
dividends  have  not  been  called  for  on  these  millions 
is  not  legal  proof  of  enemy  ownership.  Moreover, 
there  is  much  German  property  he  has  been  unable 


LAUNCHING  THE  INVISIBLE  WAR      21 

to  get,  as  under  the  law  nothing  could  be  done 
against  a  German  subject  here  who  was  not  caught 
in  an  overt  act.  Nor  has  he  been  able  wholly  to 
drive  out  the  American  agents  of  the  German 
octopus.  Hampered  by  a  hastily  made  law,  with 
holes  in  it  that  have  had  to  be  plugged  as  he  went 
along,  hampered  by  lack  of  funds  and  of  trained 
men  to  do  the  exceedingly  difficult  and  technical 
work  of  searching  out  the  German  funds,  he  and 
A1.  Mitchell  Palmer,  his  predecessor,  have  accom- 
plished much,  probably  more  than  many  men  who 
voted  for  the  law  thought  they  could.  They  have 
supplemented  it  with  individual  initiative  and 
daring. 

Protection  Needed  to  Give  Us  Time 

They  have  assured  America  time,  if  their  work 
can  be  completed  by  legislation,  in  which  to  pre- 
pare herself  for  the  fray;  they  have  driven  under- 
ground those  tentacles  of  the  octopus  which  they 
have  not  lopped  off.  But  no  work  of  theirs,  or  of 
any  other  men,  can  protect  America  for  long,  nor 
protect  her  entirely,  even  in  the  present. 

The  German  machine  is  ready  and  at  work,  its 
spies  and  propagandists  are  busy.  Secrecy  will  be 


22  GERMANY'S  NEW  WAR 

one  of  its  chief  weapons.  Its  agents  and  its  goods 
will  come  to  us  under  all  kinds  of  disguises  and 
with  all  kinds  of  suave  plans  and  attractive  induce- 
ments. Often  the  most  deadly  hook  will  be  baited 
with  immediate  gain  for  us.  The  trade  war's 
general  staff,  watching  in  Berlin,  will  seize  every 
loophole  in  our  laws,  will  evade  every  barrier  that 
can  be  evaded  by  force  or  fraud,  and  will  drive 
home  their  wedges  with  tremendous  blows. 

Against  this  there  is  no  defense  but  unceasing 
vigilance  and  patriotism,  often  at  a  sacrifice.  Un- 
less our  legislators  and  our  Administration,  unless 
our  business  men  and  our  consumers,  down  to  the 
women  who  buy  the  least  of  household  wares,  are 
alert  and  ready  to  think  of  other  things  than  the 
price  or  pro  fit  t  we  shall  fight  a  losing  war. 


CHAPTER  II 
THE  NEW  HUN  PIRACY 

GERMAN  CAMPAIGN  CAREFULLY  PLANNED — HER 
SOLID  ECONOMIC  STRUCTURE — BUILDING  TRADE 
WEAPONS  TO  SUBDUE  THE  WORLD THE  "PRO- 
TECTIVE INDUSTRY"  SCHEME — TREACHERY,  ES- 
PIONAGE AND  DECEIT  TO  BE  USED PROPAGANDA 

A  CONSTANT  AID 

RAPACITY,  greed,  dishonesty  and  piracy  are 
united  to  form  the  structure  of  the  new  German 
cult  of  world  dominion  through  commercial  ex- 
ploitation, which  has  found  its  voice  and  prophet  in 
Dr.  S.  Herzog,  who  stands  to  the  trade  war  Ger- 
many has  just  begun  as  Bernhardi  did  to  Mittel- 
europa,  conquest  and  Germany's  campaign  of  ter- 
rorism. Through  his  book,  the  "Future  of  German 
Industrial  Exports,"  run  the  same  race  egotism,  the 
same  disregard  for  others'  rights,  the  same  willing- 
ness to  commit  any  and  all  crimes  for  Kultur  and 

23 


24  GERMANY'S  NEW  WAR 

Deutschtum,  the  same  ambitions  and  the  same 
fanaticism  that  marked  the  soldier-professor's  work. 
The  book  was  written  by  a  man  of  the  Inner 
Circle,  for  the  Inner  Circle.  Its  aim  is  world 
dominion  through  trade,  its  methods  are  German,  as 
we  have  learned  to  know  them  during  the  last  five 
years.  It  is,  of  course,  without  shame,  and  it  is 
based  on  the  well-established  German  principle  that 
Germans  show  superior  Kultur  and  efficiency  in 
their  discovery  that  other  people  can  be  tricked  by 
bad  faith  and  dishonesty. 


Herzog's  Plans  on  Solid  Foundation 

Herzog's  plans  are  built  on  no  dream  founda- 
tions, but  on  the  solid  structures  inside  Germany 
that  the  world  war  and  revolution  have  not  touched. 
They  take  into  account  the  present  ruin  of  German 
overseas  trade,  and  the  implacable  hatred  of  the 
world.  But  they  provide  to  meet  these  or  evade 
them,  and  with  the  assets  and  resources  that  Gen 
many  has  left,  and  with  no  others,  they  postulate 
victory.  These  plans,  like  the  war  plans  of  the 
Great  General  Staff,  are  daring.  But  if  they  do 
not  win  it  will  be  only  because  the  new  invaders  are 
met  as  Joffre  and  Foch  met  the  Hun  in  arms. 


THE  NEW  HUN  PIRACY  25 

The  aim  at  world  dominion  is  made  clear.  Ger- 
many is  to  be  put  into  such  a  position  that  she  can 
force  other  nations  to  buy  such  goods  as  she  de- 
termines that  they  should  have  at  such  prices  as  she 
may  name;  to  sell  her  their  goods,  in  the  quantities 
she  demands,  and  at  her  prices ;  to  pay  all  bills  with 
German  exchange,  and  to  come  to  German  courts 
for  the  decision  of  every  disputed  point  of  interna- 
tional trade! 

Other  provisions,  like  forcing  foreign  nations  to 
sell  to  Germans  such  sites  of  raw  material  produc- 
tion as  she  wishes,  to  guarantee  transportation  on 
Germany's  terms,  and  to  insure  the  safety  of  Ger- 
man investments  in  that  country,  are  simply  added 
velvet.  Yet  Herzog  demands  all  these  things. 

German  Egotism  and  Insolence  Shown 

The  usual  German  egotism  runs  through  the 
book.  It  starts  on  the  first  page: 

One  of  the  strongest  girders  which  has  been 
wrought  into  the  fabric  of  the  German  Empire, 
whose  trustworthiness,  though  suspected  by 
many,  has  been  recognized  by  the  whole  world 
through  the  fortunes  of  war,  is  Germany's  genius 
in  industry.  .  .  .  Because  the  weapon  is  so  ter- 
rible, because  German  industrial  genius  is  show- 
ing itself  superior  to  all  opposition,  hostile  in- 


26  GERMANY'S  NEW  WAR 

genuity  in  the  future  will  direct  itself  before  all 
else  toward  undermining  the  mighty  bulwark  of 
the  German  pile.  After  all,  we  cannot  blame  the 
enemy  so  much,  but  we  must  make  his  molehill 
work  thoroughly  unpleasant  for  him." 

Germany's  export  trade,  Herzog  admits,  "must 
enter  hatred  as  a  liability."  He  discounts  it,  and 
prepares  to  meet  it  by  deceit. 

Business,  when  actually  conducted  in  foreign 
countries,  therefore,  will  be  forced  to  assume 
other  forms.  .  .  .  Consciously  to  court  chauvinis- 
tic opposition  over  and  above  the  industrial  and 
economic  difficulties  would  be  unthinkable. 

And  again: 

All  the  hatred  of  foreign  nations  cannot  de- 
liver them  from  their  needs  and  necessities.  This 
act  can  be  safely  counted  upon.  .  .  .  For  his  busi- 
ness' sake  he  will  temporarily  forget  his  hatred 
of  Germany.  .  .  .  Quality  and  price  combined 
are  two  factors  which  in  short  time  will  over- 
come all  opposition,  even  of  a  chauvinistic 
nature. 

Bribes  to  Neutrals  to  Aid  Huns'  Plans 

Having  thus  disposed  of  the  resentment  of  the 
300,000,000  who  have  suffered  from  the  German 


THE  NEW  HUN  PIRACY  27 

lust,  Herr  Herzog  proceeds  with  his  plans.  A  first 
step  is  to  offer  good  bargains,  chiefly  to  the  nations 
that  have  remained  neutral ;  to  bolster  certain  weak 
spots  in  German  commercial  power.  For  these  the 
neutrals  are  to  be  allowed  a  profit  in  selling  Ger- 
man goods  to  unsuspecting  former  enemies.  He 
then  explains  his  great  weapon. 

This  is  the  "protective  industry."  As  a  last  re- 
sort he  plans  that  general  embargoes  against  coun- 
tries which  do  not  meet  the  demands  outlined  above 
shall  force  them  to  take  German  orders.  But, 
usually,  this  will  not  be  necessary.  Certain  indus- 
tries— he  mentions  chiefly  chemicals,  dyes  and 
drugs  as  examples — are  to  be  kept  so  exclusively 
under  German  control  that  there  is  no  possible  sup- 
ply for  the  rest  of  the  world  except  from  Germany. 
When  a  country  fails  to  take  German  orders  it  is 
to  be  cut  off  from  its  supply  of  these  essential 
products.  If  anyone  tries  to  smuggle  the  needed 
supplies,  this  will  be  detected  by  the  reports  which 
all  users  of  German  goods  will  be  obliged  to  turn 
in.  "He  would  then  fall  a  victim  to  the  same  fate, 
as  would  the  whole  foreign  industrial  association 
in  question,  the  destruction  of  which  in  this  way 
would  in  no  wise  be  difficult,"  says  Herzog.  He 
goes  on: 


28  GERMANY'S  NEW  WAR 

To  Make  Others  Fight  Battles  for  Germany 

The  same  procedure  is  to  be  recommended 
when  a  foreign  industry,  which  is  not  dependent 
upon  German  manufactures,  persists  in  boycot- 
ting German  goods.  In  this  case  a  closely  allied 
industry  which  supplies  it,  or  is  supplied 
by  it,  as  the  case  may  be,  will  have 
to  feel  the  effects  of  the  embargo  unless  the 
closely  allied  industry  makes  redress  in  some  in- 
ternal way  and  brings  the  hostile  industry  to  its 
senses.  The  battle  will  thus  be  fought  out  ac- 
cording to  the  approved  German  method  on 
foreign  soil,  only  with  the  diiference,  neverthe- 
less worthy  of  notice,  that  both  contesting  parties 
must  be  furnished  by  foreign  countries. 

The  state's  embargo  mentioned  above  always 
remains  ready  as  a  powerful  reserve  for  the  at- 
tack in  case  petty  warfare  degenerates  into  a 
general  conflict. 

Such  is  the  protective  industry  scheme — quite 
simple.  Armed  with  this  weapon  Germany  enters 
the  conflict.  Her  first  step  is  to  flood  the  world 
with  spies,  who  will  tell  her  just  how  much  of  each 
product  any  given  country  can  take.  From  these 
are  to  be  compiled  "defense  statistics,"  and  the 
quotas  assigned  on  the  basis  of  these  statistics  mark 
the  line  below  which  no  other  nation's  consumption 
may  drop  under  penalty  of  direct  attack. 


THE  NEW  HUN  PIRACY  29 

To  back  up  this  chief  weapon  Germany  is  to 
have  "economic  organizations  with  formerly  un- 
thinkable authority,  and  operating,  perhaps  for  this 
very  reason,  with  shining  success.  .  .  .  They  can  be 
still  better  organized  (than  the  war  bodies)  and 
designed  primarily  to  keep  certain  superior  indus- 
tries located  exclusively  in  this  country." 

Whole  State  Power  Behind  Each  Industry 

Industries  which  have  protective  power  for  the 
state  are  to  be  given  state  help  of  all  kinds.  Funds 
from  all  other  industries,  which  may  receive  their 
aid  in  a  commercial  war,  are  to  be  collected  to 
support  them.  The  whole  thing  is  to  be  under 
direct  state  control.  The  industries  "are  to  make 
known  their  foreign  customers  to  a  bureau  of  con- 
trol. This  bureau  works  hand  in  hand  with  the 
directors  of  the  general  guarantee  fund." 

"Change  of  ownership  in  protective  industries 
and  also  the  appointment  of  their  higher  officers  are 
subject  to  the  approval  of  the  state." 

Internal  competition  is  to  be  abolished. 

All  businesses  are  to  be  organized  into  federations 
and  "protective  measures  for  the  export  trade  are 
issued  by  a  single  body,  which  is  composed  of  state 


30  GERMANY'S  NEW  WAR 

and  industrial  representatives  and  which  hands 
down  its  instructions  to  the  individual  federations." 
Capital,  science  and  labor  are  all  to  be  drafted 
by  the  state  and  held  under  most  rigid  conditions. 
Here  is  his  provision  for  labor: 

Care  must  be  taken  that  special  material  ad- 
vantages ...  be  granted  to  these  individuals  to 
hold  them  fast  to  the  industry  in  question.  These 
persons,  whether  they  be  directors,  operating  or 
scientific  officers,  or  laborers,  must  be  subject  to 
a  state  organization  similar  to  that  of  an  army. 
Without  permission  of  this  organization  no 
emigration  of  persons  on  these  lists  can  take 
place.  .  .  .  There  will  always  be  deserters.  They 
must  expect  severe  punishment. 

State's  Money  to  Back  All  Campaigns 

The  state  is  to  give  industries  every  means  of 
support,  premiums,  tariffs,  freight  concessions  and 
direct  subsidies  when  necessary.  In  fact,  the  Ger- 
man government  has  long  been  doing  this  for  cer- 
tain industries. 

Finally,  the  methods  of  the  organization  abroad 
are  carefully  laid  down.  The  vast  espionage  sys- 
tem ,  to  center  chiefly  in  young  engineers  and 
chemists  who  seek  work,  apparently  on  their  own 


THE  NEW  HUN  PIRACY  31 

responsibility,  with  foreign  firms,  has  been  men- 
tioned. Representatives  of  the  commercial  army 
are  to  be  made  a  part  of  every  diplomatic  mission. 
Treaties  are  to  be  made — and  broken.  He  writes : 

Commercial  treaties  will  come  again  .  .  .  and 
will  also  be  broken  again.  They  must  be  couched 
in  such  terms  that  they  bring  advantages  to  the 
export  trade  so  long  as  they  are  kept  and  do 
not  threaten  its  existence  when,  for  variety,  they 
are  arbitrarily  abrogated.  ...  To  reckon  on  the 
security  of  treaties  .  .  .  would  be  more  than 
improvident. 


Propaganda  to  Precede  Invasion 
Propaganda  is  to  precede  the  invasion. 

The  propaganda  is  to  be  carried  out  in  in- 
creased measure  ...  in  a  form  which  will  not 
irritate  the  feeling  of  past  enemies.  .  .  .  Where 
it  is  a  question  of  carrying  out  propaganda  in 
countries  whose  feelings  for  the  first  few  years 
will  presumably  remain  hostile  to  Germany  this 
effort  toward  transformation  must  be  abandoned. 
Rather  we  must  strive  to  make  the  influence  of 
such  feelings  secondary,  placing  in  the  fore- 
ground a  recognition  of  the  quality  of  German 
export  products. 


32  GERMANY'S  NEW  WAR 

Because  of  this  hostility  abroad  German  goods 
must  not  appear  in  their  true  colors: 

Out  of  regard  for  the  rehabilitation  of  trade 
with  formerly  hostile  countries  the  German  garb 
of  manufactured  articles  will  have  to  be  put 
away. 

Trade  marks  are  to  be  pirated,  bought  or  rented. 
Goods  are  to  be  sold  through  neutral  cloaks.  When 
these  are  not  enough  the  goods  are  to  be  sold  with- 
out trademarks,  and — in  case  Germany  won  the 
war — there  was  to  be  a  peace  treaty  provision  for- 
bidding the  use  of  all  trademarks,  so  that  the  Ger- 
man goods  would  be  lost  in  the  unidentified  mass. 

This  is  the  German  scheme  as  outlined  by  Herr 
Doktor  Herzog. 

It  sounds  fantastic  and  incredible,  as  did  Bern- 
hardi's  prophecies. 

But  Bernhardi's  prophecies  have  come  true — all 
but  Germany  victory — and  an  examination  of  Ger- 
man preparation  to-day  shows  that  far  more  tlian 
half  of  these  plans  of  Herzog' 's  are  already  in  effect. 

More  are  prepared. 


CHAPTER  III 
THE  MACHINERY  OF  CONQUEST 

WHOLE  GERMAN  NATION  COMBINED  FOR  ATTACK  ON 
THE  WORLD — SCHEME  WORKED  OUT  IN  EVERY 
DETAIL  IN  AMERICA — SCIENTIFIC  "DUMPING" 

TO  BE  USED  TO  RUIN  AMERICAN  INDUSTRIES 

GREAT  TRUSTS,  RAILWAYS,  AND  BANKS  ALL 
UNITED  AND  BACKED  AND  DIRECTED  BY  THE 
GOVERNMENT 

"BANKS,  cartels,  transport  services — all  these 
forces  are  combined  in  one  single  organism,  the 
tentacles  of  which  are  spread  out  in  all  directions," 
writes  Henri  Hauser,  the  great  French  economist, 
in  his  book  on  "Germany's  Commercial  Grip  on  the 
World,"  which  has  become  almost  a  handbook  for 
the  men  in  America  who  have  been  fighting  the 
German  octopus.  He  proceeds  to  summarize  the 
machine  and  its  menace,  and  of  his  description 
Francis  P,  Garvan,  United  States  Alien  Property 

33 


34  GERMANY'S  NEW  WAR 

Custodian  the  man  in  America  most  familiar  with 
the  German  danger,  says: 

We  have  found  the  German  commercial  inva- 
sion, as  portrayed  by  Hauser,  worked  out  in  per- 
fect detail  in  America.  Every  part  of  it  is 
present,  and  the  menace  which  it  still  has  can 
hardly  be  overemphasized.  So  accurate  is  his 
summary  of  conditions  here  that  in  reporting 
what  we  have  found  in  our  investigations  it 
would  be  entirely  possible  to  use  his  book  as  a 
basis,  merely  putting  in  the  facts  as  to  German 
concerns  in  America  as  illustrations  or  footnotes. 

Germany's  Machine  for  Trade  Conquest 

Here  are  a  few  more  points  from  Hauser's  sum- 
mary: 

It  would  show  scanty  knowledge  of  Germany 
to  imagine  that  this  organism  could  be  brought 
to  life  by  appealing  exclusively  to  economic 
forces,  individual  or  collective.  .  .  .  Modern 
Germany  is  essentially  a  state.  No  form  of  na- 
tional activity  in  it  is  conceivable  outside  the 
framework  of  the  state  .  .  .  German  industry 
demands  much  of  the  state;  it  concedes  even 
more  to  it. 

By  means  of  this  concentration  of  all  its  en- 
ergies, by  this  unity  of  control,  economic  Ger- 
many has  become  a  power  nearly  as  formidable 


THE  MACHINERY  OF  CONQUEST        35 

as  military  Germany,  and  of  the  same  species: 
a  power  of  domination  and  conquest. 

During  forty  years  the  German  staff  prepared 
itself  for  a  war  which  had  to  come  at  some  time 
or  other  and  whose  outbreak  would  end  in  a 
decision.  But  the  economic  battle  rages  every 
day.  Every  day  the  general  staff  of  the  banks, 
cartels  and  shipping  companies  elaborates  its 
plans  of  conquest,  and  with  marvelous  flexibility 
adapts  them  to  circumstances.  The  execution  on 
this  ground  immediately  follows  the  strategic 
conception.  Espionage,  which  in  matters  mili- 
tary is  only  a  preparation  for  war,  is  already  in 
economic  matters  a  form  of  conquest.  Not  con- 
tent with  besieging,  with  attempting  to  surmount 
the  frontiers  of  the  enemy,  German  industry 
plants  itself  during  open  peace  in  the  very  heart 
of  the  countries  it  wishes  to  enslave,  in  the  posi- 
tions whose  importance  the  economic  strategy  has 
revealed  to  her. 

By  this  daily  invasion  Germany  established  her 
domination  over  all  peoples  so  firmly  that  only 
a  stroke  of  madness  could  have  made  her  pre- 
fer the  formidable  hazard  of  battle  to  the  prog- 
ressive and  sure  infiltration.  (Note:  This  is  one 
of  the  statements  which  Mr.  Garvan  declares  has 
been  PROVED  by  the  work  of  the  Alien  Prop- 
erty Custodian  in  America. )  This  certain  power, 
almost  elemental  and  destined,  of  the  German 
effort  appeared  to  many  good  souls  as  a  guarantee 
of  world  peace.  Why  should  Germany  make 
war?  Another  ten  or  twenty  years  of  peace — 
of  this  apparent,  quite  material  peace — and  the 


36  GERMANY'S  NEW  WAR 

world,    economically    speaking,    would    become 
German. 


Trade  Plans  Basis  for  the  World  War 

M.  Hauser  then  shows  how  Germany  recognized 
certain  weaknesses  which  time  would  develop  in  her 
plans  for  economic  conquest. 

If  one  doubted  the  role  of  the  economic  causes, 
(he  goes  on),  or  rather  of  the  economic  mentality 
of  this  war,  it  would  be  sufficient  to  convince  one 
of  it  to  see  how  the  Germans  in  their  dreams 
conceive  of  the  German  victory.  It  is  an  in- 
dustrial victory.  It  is  the  compulsory  marriage 
of  German  coal  and  foreign  iron,  it  is  the  reduc- 
tion of  vassalized  peoples  to  the  role  of  perpetual 
customers  of  the  German  factory.  .  .  . 

It  is  madness  to  think  of  the  ruin  of  Germany, 
(he  says,  after  pointing  out  the  tremendous 
strength  which  remains  to  her  in  spite  of  all  that 
the  Allies  may  do).  It  is  a  further  madness  to 
believe  that  by  a  kind  of  collective  boycott  we 
are  going  to  suspend  all  commercial  relations  with 
Germany.  .  .  . 

The  Germany  of  to-morrow  will  be  an 
economic  reality.  With  this  reality  we  shall  be 
obliged  to  reckon.  And  this  reality  will  remain 
a  menace,  because  vanquished  Germany  will  re- 
nounce neither  her  ambitions  nor  her  methods. 


THE  MACHINERY  OF  CONQUEST        37 
All  Charges  Proved  On  American  Soil 

All  this,  says  the  man  who  is  directing  the 
American  fight  against  this  menace,  has  been  proved 
true,  and  on  American  soil.  It  was  proved  true 
by  what  Germany  did  to  America  before  the  war. 
The  hundreds  of  German  companies  here  were 
found  to  be  each  a  tentacle  of  the  great  German 
beast  in  Europe — each  an  outpost  of  an  army  of 
invasion. 

That  army  had  been  organized  at  first  as  a  matter 
of  defense  against  Germany's  own  mistakes  of  in- 
dustrial development — as  a  means  of  getting  rid 
of  the  surplus  products  which  her  over-developed 
factories  were  turning  out ;  and  of  bringing  in  more 
work  to  tide  over  periods  of  depression.  But  its 
offensive  power  was  soon  recognized,  its  possibili- 
ties were  carefully  studied,  and  there  began  the 
building  up,  under  state  control  and  with  state  back- 
ing, of  a  great  system  for  the  economic  enslave- 
ment of  the  world.  All  German  activities  and 
powers  were  made  to  help. 

Greatest  Weapon  is  Scientific  "Dumping" 

Its  greatest  weapon,  the  thing  on  which  the  cam- 
paign started  and  around  which  it  is  built  up,  is 


38  GERMANY'S  NEW  WAR 

"dumping."  This  means  the  selling  of  goods  in 
foreign  countries  at  a  price  below  the  market  and 
often  below  the  cost  of  production.  It  is  a  practice 
to  which  the  business  men  of  all  countries  have 
often  resorted  as  a  temporary  expedient,  when  their 
factories  were  overstocked,  or  they  were  in  im- 
mediate need  of  money.  It  has  the  result  of  de- 
stroying the  market  in  the  foreign  country,  while 
not  breaking  the  prices  in  the  producers'  own  ter- 
ritory. It  has  been  bitterly  denounced,  even  as  a 
temporary  expedient.  But  it  remained  for  Germany 
to  make  of  dumping,  and  of  over-production  be- 
hind it,  an  economic  weapon  with  which  to  fight  a 
world  campaign. 

Germany  organized  "dumping"  as  a  national 
policy.  She  saw  that  funds  were  provided  by  which 
any  individual  industry  could  continue  dumping  at 
a  loss  till  the  campaign  had  been  won.  She  put 
behind  these  industries  her  banks,  her  shipping 
facilities,  both  external  and  internal,  and  the  profit 
of  government  contracts  and  sometimes  subsidies. 

Three  Advantages  Won  by  "Dumping" 

By  this  she  accomplished  three  things. 

First,  she  beat  down,  by  the  low  prices  at  which 


THE  MACHINERY  OF  CONQUEST        39 

her  products  at  first  came  on  the  foreign  markets 
any  attempts  at  competition  which  were  made. 
America  could  have  no  dye  or  chemical  industry. 
In  England  she  forced  the  sheet  iron  mills  to  close. 
All  over  the  world — except  in  America — she  con- 
trolled smelters.  These  are  merely  examples. 

Second,  when  the  foreign  competitor  had  been 
killed  she  put  the  prices  up  to  a  point  where  the 
profit  was  enormous.  In  America,  for  instance,  to 
kill  our  manufacture  of  bicarbonate  of  potash,  the 
Germans  sold  as  low  as  2.2  cents  a  pound.  When 
the  Americans  were  killed  the  price  went  up  to  7^3 
cents  and  stayed  there! 

Third,  there  is  an  advantage  to  a  manufacturer, 
at  certain  times,  in  keeping  his  factory  running 
even  at  a  slight  loss.  Germany  secured  this.  And 
when  a  factory  is  running  at  a  profit,  from  the 
sales  in  well-protected  home  territory,  there  is  a 
considerable  margin  within  which  it  is  profitable 
to  increase  production  of  goods  to  be  sold,  not  quite 
at  a  loss,  but  at  a  price  which  is  far  from  carrying 
a  full  share  of  the  factory  costs.  Germany  gave 
her  manufacturers  protection  in  the  home  market 
to  assure  that  home  profit,  and  encouraged  them  to 
take  advantage  of  that  margin. 


40  GERMANY'S  NEW  WAR 

Banks  Gave  Unified  Support  to  Invasion 

To  back  up  these  dumping  campaigns  and  the 
thousand  auxiliary  schemes  by  which  they  were 
reinforced,  covered  and  consolidated — espionage, 
propaganda,  transplanted  industries,  agencies,  and 
so  forth — Germany  depended  first  on  her  banks. 
These,  however  they  might  compete  at  home,  co- 
operated to  push  foreign  trade.  They  became  a 
part  of  the  "dumping"  industries,  putting  men  from 
these  industries  on  their  boards  of  directors — the 
Reichsbank  has  directors  in  174  other  concerns, 
with  a  total  capital  of  $2,636,988,000. 

They  furnished  capital  on  speculation,  depending 
on  the  multiplicity  of  their  gambles  to  bring  in  a 
net  profit,  and  won  on  the  scheme.  They  saw 
that  all  these  concerns  worked  in  co-ordination  for 
Deutschtum  and  against  the  rest  of  the  world,  no 
matter  what  apparent  alliances  might  be  made  with 
concerns  in  other  countries.  They  gathered,  di- 
gested and  distributed  the  most  confidential  in- 
formation. They  became  the  brains,  as  well  as  the 
support  of  the  invasion — they  organized,  mobilized 
and  directed  the  commercial  army. 


THE  MACHINERY  OF  CONQUEST        41 

Great  Trusts  Formed  to  Push  Exports 

Next  came  the  cartels.  America  has  nothing 
exactly  like  them,  and  the  term  is  applied  to  several 
differing  forms  of  organization.  But  they  amount 
to  this — in  each  industry  an  organization  is  formed 
to  coordinate  the  work  of  the  different  producers 
or  sellers  for  mutual — and  German — advantage. 
They  often  fix  selling  prices,  sometimes  consolidate 
selling  organizations,  gather  information,  regulate 
production  and  export  and  allot  profits.  They  make 
of  each  industry  a  regiment — a  unit  in  the  army. 

Elaborate,  far-sighted  and  daring  development 
of  cheap  transportation  was  provided  to  back  up 
the  producers.  The  inland  waterways,  the  rail- 
roads, the  ports,  were  all  used  and  canals  were 
built.  Nowhere  in  the  world  was  transportation 
so  easy  or  so  cheap.  France  for  example  often 
found  that  she  could  put  down  her  products  in  the 
Russian  market  most  cheaply  by  shipping  them 
through  Germany,  and  letting  a  German  house 
make  a  broker's  commission  on  them — and  control 
the  market. 

All  Used  to  Back  "Dumping"  Campaigns 
All  these  facilities,  mostly  under  state  control, 
were  used  to  back  the  dumping  campaigns,  and 


42  GERMANY'S  NEW  WAR 

freight  rates  were  always  adjusted  with  one  or  both 
eyes  on  the  effect  they  would  have  on  the  price  at 
which  the  goods  transported  could  be  placed  in  the 
foreign  market. 

Finally,  and  only  after  a  struggle  with  the  in- 
dividual interests,  the  state  took  charge  of  the 
campaign.  It  began  to  force  the  organization  of 
cartels,  it  made  sure  that  the  banks  carried  out  the 
campaign.  It  helped  with  tariff  schedules  and 
diplomacy  all  calculated  to  aid  the  business  in- 
terests. It  aided  the  espionage  system,  and  finally 
linked  the  commercial  and  the  military  and  naval 
spy  machines.  It  did  not  quite  have  complete  con- 
trol when  the  war  began,  but  its  control  was  fast 
increasing,  and  it  was  a  recognized  partner  in  the 
general  campaign,  and  a  dominating  factor  in  many 
of  the  individual  enterprises. 

This  organization  is  not  only  uninjured  by  the 
war — it  is  stronger  than  ever.  The  state  control 
has  increased,  the  consolidation  of  interests  per- 
fected, and  goods  for  a  tremendous  dumping  cam- 
paign have  been  collected.  Details  of  how  the  army 
has  been  prepared  for  the  new  campaign  will  be 
given  in  the  next  chapter. 


CHAPTER  IV 
MOBILIZING  THE  NEW  ATTACK 

THE  ALLIED  WORLD  CAUGHT  OFF  GUARD — GER- 
MANY'S INDUSTRIAL  MACHINERY  STRONGER 
THAN  IN  1914 — GOVERNMENT  DEPARTMENT 
ORGANIZED  TO  DIRECT  TRADE  WAR — CHEMICAL 
INDUSTRY  THE  "SHOCK  DIVISION" — EXPORT 
TRUSTS  FORMED  AND  GOODS  STORED  FOR  "DUMP- 
ING CAMPAIGN" 

GERMANY'S  new  trade  attack,  like  her  invasion  of 
Belgium,  caught  the  world  asleep.  Her  mobiliza- 
tion was  instant,  her  preparation  complete,  and  she 
has  been  operating  at  every  moment  since  the 
armistice  was  signed,  and  even  before,  right  up  to 
the  limit  permitted  by  its  terms.  Defeat,  revolu- 
tion, disorder,  threatened  Bolshevism  and  her  much 
advertised  industrial  prostration,  none  has  in  the 
least  slowed  down  her  campaign  or  changed  its 
course. 

43 


44  GERMANY'S  NEW  WAR 

She  started  with  her  industrial  plant,  her  base 
of  campaign,  in  splendid  condition. 

"It  must  be  kept  in  mind,"  says  a  War  Trade 
Board  Report,  "that  in  all  of  this  time  the  German 
economic  organization  was  not  destroyed.  The 
Allies  may  have  shut  off  trade,  destroyed  some  of 
the  units,  and  damaged  it  by  forcing  it  to  remain 
idle,  but  it  was  very  largely  intact." 

In  addition  she  had  added  to  her  equipment  mil- 
lions of  dollars  worth  of  machinery  stolen  from 
Belgium,  from  northern  France,  and  from  Poland, 
three  of  the  greatest  industrial  regions  of  the  world. 
Incidentally  she  is  making  a  great  diplomatic  fight 
at  this  moment  to  avoid  restoring  these  stolen 
machines. 


Munition  Plants  Ready  for  New  War 

Even  during  the  war,  preparations  were  com- 
pleted for  turning  the  great  war  plants  to  industrial 
uses,  as  speedily  and  efficiently  as  they  were  turned 
from  the  arts  of  peace  to  those  of  war  in  July 
and  August,  1914.  The  great  Krupp  plant  to-day 
is  making  typewriters !  And  on  a  stolen  American 
patent!  If  the  putative  visitor  from  Mars  should 
fly  over  Europe  in  an  airship  to-day  he  would  never 


MOBILIZING  THE  NEW  ATTACK        45 

guess  from  the  appearance  of  the  regions  of  Lens 
and  those  of  Essen  and  Ludwigshaven  that  Ger- 
many was  a  loser  in  the  war. 

Most  menacing  of  all,  she  has  during  the  war 
consolidated  her  industrial  organization,  following 
closely  Herzog's  plans.  He  says: 

In  this  statement  are  given  the  guiding  lines 
for  the  construction  of  the  state  protective  or- 
ganization. Such  a  federation  is  to  be  compared 
to  a  large  reservoir  into  which  flow  the  carefully 
defined  protective  measures  of  the  state,  and  also 
the  special  interests  of  industry.  Here  they 
mingle,  to  be  unified  at  last  in  a  quiet  and  clarified 
whole,  the  pressure  of  which  finds  its  outlet 
through  proper  channels. 

Protective  measures  for  the  export  trade  are 
issued  by  a  single  body  which  is  composed  of 
state  and  industrial  representatives,  and  which 
hands  down  its  instructions  to  the  individual 
federation. 

Machine  Improved  While  War  Went  On 

So  during  the  war,  the  German  government's 
control  of  all  trade  has  been  made  firmer,  the  dif- 
ferent industries  have  been  organized — by  force 
when  necessary ;  new  bodies  for  external  aggression 
have  been  formed;  the  whole  machine  has  been 


46  GERMANY'S  NEW  WAR 

consolidated  and  made  responsive  to  a  single 
dominant  and  predatory  Teutonic  will.  Materials 
have  been  gathered  in  great  quantities  to  be  thrown 
on  the  world  market  to  beat  down  the  competition 
that  has  grown  up  during  the  war.  Finances  have 
been  reorganized.  Finally  the  soldiers  of  the  com- 
mercial and  industrial  army  have  received  intensive 
training  even  in  the  prison  camps  of  the  Allied 
nations. 

The  reorganization  began  in  the  government. 
First,  as  a  war  measure,  which  it  is  now  planned 
to  continue,  the  importation  of  new  materials  has 
been  centralized  in  a  government  institution,  the 
Central  Einkaufsgesellschaft.  Importation  of  other 
goods  for  private  account  has  been  strictly  regulated. 
Export  has  been  permitted  only  under  restrictions, 
and  only  when  the  shipper  agrees  to  place  the  ex- 
change received  at  the  disposal  of  the  Reichsbank. 

New  Department  to  Manage  Trade  War 

Next  there  has  been  organized  a  new  Imperial 
Department  of  Economic  Affairs,  the  Reich  wirt- 
schaftamt.  This  takes  charge  of  social  and  com- 
mercial policy,  matters  affecting  the  welfare  of 
labor,  commerce  and  shipping,  and  economic  ques- 


MOBILIZING  THE  NEW  ATTACK        47 

tions  affecting  agriculture  and  industry.  Its  juris- 
diction in  commercial  matters  embraces  questions 
of  commercial  policy,  commercial  treaties,  the 
economic  aspects  of  the  tariff  and  taxation,  and  of 
mobilization  and  demobilization,  insurance,  cor- 
porations, banks,  the  stock  exchanges,  exhibitions 
of  goods  and  matters  concerning  conditions  of 
production  at  home  and  abroad,  general  statistics 
of  the  trade  with  foreign  countries  and  weights  and 
measures.  It  is  Herzog's  dream  come  to  life. 

Herzog  also  provides  for  solid  trade  federations. 
These  have  been  formed,  widely  extending  the 
cartel  system,  which  Germany  found  so  powerful 
and  useful  before  the  war.  The  most  notable  of 
these  is  the  great  chemical  syndicate,  uniting  the 
whole  tremendous  industry,  on  which  have  centered 
Germany's  war  strength  and  commercial  spy  sys- 
tem, and  which  is  to  be  the  backbone  of  her  aggres- 
sive machinery,  the  chief  of  Herzog's  "protective 
industries."  This  cartel  has  a  capital  of  about 
400,000,000  marks  and  an  actual  worth,  according 
to  the  exchange  prices  of  the  stocks,  of  nearly  four 
times  as  much — about  $400,000,000. 


48  GERMANY'S  NEW  WAR 

Industries  Forced  to  Form  New  Trusts 

Other  industries,  besides  the  many  already  fairly 
well  organized,  such  as  coal,  steel,  machinery  of 
various  kinds,  etc. — have  come  together  during  the 
war  and  formed  cartels.  Among  these  are  the  bar 
iron  trade,  the  silk  products,  other  textile  manu- 
factures and  tool  and  implement  making.  But  this 
has  not  been  enough.  When  an  industry  refused 
or  failed  to  combine,  the  government  has  forced  it, 
and  the  result  has  been  great  and  powerful  cartels 
in  leather,  boots  and  shoes  and  soap. 

Finally  there  has  been  a  lining  up  of  the  already 
powerfully  consolidated  bank  system.  In  Germany, 
as  in  no  other  country,  the  banks  are  the  active  and 
direct  partners  of  business.  Practically  all  of  the 
great  trusts,  old  and  new,  were  fathered  by  one 
of  the  four  "Big  D"  banks,  the  Deutsche,  Dresdner, 
Disconto  and  Darmstaditer.  The  system  centered, 
rather  loosely,  in  the  Reichsbank.  Before  the  war 
there  was  some  competition  among  these  banks — 
competition  that  did  not  cost  Germany  money,  al- 
ways. Now  they  have  agreed  to  sink  their  differ- 
ences and  put  up  a  common  front.  There  is  much 
talk  of  an  actual  consolidation. 


MOBILIZING  THE  NEW  ATTACK         49 

Plenty  of  Labor  for  Huns'  Factories 

Germany  has  suffered  far  less  than  the  casualty 
figures  show  in  the  destruction  of  labor.  In  the 
first  place,  whenever  possible  she  has  kept  her  most 
skilled  laborers  in  the  factories,  both  for  the  sake 
of  wartime  production  and  for  the  sake  of  having 
them  for  use  now.  This  has  counted  heavily,  as 
against  England,  where  the  volunteer  system  put 
the  best  and  finest  of  her  skilled  labor  in  the 
trenches,  and  it  was  only  after  months,  and  heavy 
losses,  that  she  began  the  combing  out  process  that 
saved  the  remnant.  In  the  second  place  Germany, 
a  country  where  it  was  always  a  common  sight  to 
see  a  woman  yoked  with  a  cow  for  the  ploughing, 
has  used  its  women  in  its  factories  far  more  brutally 
and  more  efficiently  than  any  other  country.  She 
plans  to  keep  them  there. 

Germany's  plans  for  the  demobilization  of  her 
factories  from  a  war  to  a  peace  footing  have  been 
made  with  the  same  care  that  marked  her  entrance 
into  the  war.  The  change  to  commerce-war 
production  can  be  made  as  quickly  as  was  the 
change  from  peace  to  munitions.  In  one  American- 
owned  factory  in  Berlin,  for  instance,  on  the  day 
war  was  declared,  an  order  was  received  that  a 


50  GERMANY'S  NEW  WAR 

wagon  should  be  sent  to  a  certain  place.  There  the 
Germans  delivered  tools,  chucks,  gauges,  all  the 
wherewithal  for  the  manufacture  of  shell  fuses, 
and  all  prepared  to  fit  the  machines  in  that 
particular  factory.  And  the  management  did  not 
know  that  the  general  staff  knew  anything  about 
its  machines.  In  twenty- four  hours  that  factory 
was  at  war.  The  reversal  will  be  as  swift 

Great  Export  Bodies  Also  Organized 

Another  step  in  the  Herzog  plans  is  the  organiza- 
tion of  bodies  to  push  the  export  trade.  This,  too, 
has  been  done,  though  not  so  completely  as  yet. 
More  than  fifty  such  bodies  are  now  in  existence 
to  cover  the  gathering  of  information,  propaganda, 
selling  agencies,  price  fixing,  rate  making,  legisla- 
tion and  all  the  other  details  of  exporting.  These 
all  center,  finally,  in  four  great  bodies: 

The  "Handelvetragsverin"  (Association  for 
Treaties  of  Commerce),  which  is  to  collect  infor- 
mation. 

The  "Deutsche  Uebersee  Dienst"  (German  Over- 
sea Service),  to  handle  and  sell  export  products, 
care  for  credits,  collections,  etc. 

The  "Actiengesellschaft  fur  In-und-Ausland  Un- 


MOBILIZING  THE  NEW  ATTACK         51 

ternehmygen"  (the  Corporation  for  Foreign  and 
Domestic  Undertakings),  capitalized  at  25,000,000 
marks,  with  the  backing  of  banks  and  others  having 
a  great  financial  power,  to  form  subsidiaries  in 
foreign  countries  for  floating  railways,  irrigation 
projects,  electrical  plants,  factories,  development  of 
mines  and  so  forth. 

The  "Kolonialivavereinkaufs  Gesellschaft" 
(Colonial  Buying  'Association),  including  fifty 
firms  for  the  handling  of  colonial  goods. 

New  Unions  to  Pool  Whole  Natural  Strength 

But  this  is  not  all.  There  are  now  being  formed 
the  "Verein  fuer  das  Deutschtum  in  Ausland*' 
(Union  for  Germanism  Abroad)  and  the  "Deutsch- 
Sud-Amerika  Verein"  (German-South  American 
Union).  And  a  bill  has  been  submitted  to  the 
Reichstag — and  the  news  suppressed  by  the  censor 
— for  the  "Auslandamt,"  a  single  great  corporation 
to  have  full  charge  of  all  German  interests  abroad. 

The  training  which  has  been  given  the  men  who 
are  to  carry  the  German  war  abroad  has  been  in- 
tensive. In  every  prison  or  internment  camp  the 
Germans  have  been  studying,  studying  languages, 
trade  needs,  salesmanship,  customs  of  countries, 


52  GERMANY'S  NEW  WAR 

technical  trade  matters,  studying  anything  and 
everything  that  could  help  them  to  make  or  sell 
German  goods. 

The  standardized  German  method  of  opening  a 
trade  fight  is  by  dumping.  Goods  are  thrown  on 
the  market  at  prices  below  cost  till  the  competitor 
is  stifled.  In  one  American  dumping  campaign  the 
buyers  were  assured  by  the  Germans  that  they 
would  cut  a  half  cent  under  anything  the  doomed 
American  concern  could  offer.  They  did  it,  too — 
till  the  American  went  under. 

Ready  to  "Dump"  Dyes  and  Potash 

Germany's  central  industry  is  her  dyes  and 
chemicals.  These  come  as  by-products  of  the  ex- 
plosives, and  hundreds  of  millions  of  dollars  worth 
of  them  have  been  gathered  during  the  war.  They 
are  ready  to  be  dumped,  in  America  as  elsewhere, 
at  prices  that  will  make  the  American  buyer  of 
dyes  think  heaven  has  come.  Then  when  the  new 
American  dye  industry  is  killed  Germany  will  make 
us  pay  the  costs  of  the  dumping  campaign. 

The  potash  (fertilizer)  industry  has  also  grown 
in  this  country  and  the  Germans  need  a  monopoly 
of  it  as  a  bludgeon  over  us.  Therefore  great  quan- 


MOBILIZING  THE  NEW  ATTACK         53 

titles  of  potash  have  been  gathered,  and  Allied 
prisoners  have  been  used  to  help  accumulate  this 
weapon  against  their  own  countries.  There  are 
dumping  stocks  ready  in  steel,  and  it  is  suspected 
in  all  other  things  in  which  Germany  was  not  so 
very  short  of  material  that  she  had  to  send  every 
ounce  to  the  trenches. 

A  dumping  campaign  takes  money.  Germany, 
as  a  nation,  may  be  bankrupt,  and  she  may  be 
crippled  by  the  peace  demands  for  reparations,  but 
her  great  export  industries  are  richer,  far  richer, 
than  ever  before.  The  profits  of  her  iron,  steel, 
coal  and  dye  industries  have  been  tremendous,  and 
they  are  ready  to  pay  for  the  campaign  until  the 
campaign  begins  to  take  care  of  itself  through  in- 
demnities from  beaten  competitors.  Nor  are  the 
banks  poor — their  balances,  their  deposits  and  their 
other  resources  have  never  been  at  so  high  a  point. 

Germany  is  prepared.    And  we?, 


CHAPTER  V 
HIDING  BEHIND  THE  NEUTRALS 

GERMAN    PLAN    PREPARES   TO    OUTWIT   WORLD'S   RE- 
SENTMENT  NEUTRAL   NAMES   TO   BE    USED   TO 

CAMOUFLAGE    HUN'S    PRODUCTS — SCHEME    PUT 

INTO  OPERATION  WHILE  WAR  WAS  GOING  ON 

DRUMMERS      TO      BE      DISGUISED TRADEMARKS 

BOUGHT  OR  STOLEN 

HERZOG,  the  prophet  of  the  New  Prussian  Piracy, 
lays  down  among  others  these  rules  for  tricking  the 
world: 

The  reopening  of  export  relationships  with 
once  hostile  countries  must  take  place  through 
neutrals,  instead  of  through  direct  representa- 
tives, as  in  the  past. 

Neutral  trading  journals  represent  an  effective 
means  for  promoting  the  German  manufacturing 
export  trade. 

Denationalization  of  goods  should  not  be 
avoided. 

54 


HIDING  BEHIND  THE  NEUTRALS       55 

German  exporters  must  expect  that,  for  a  long 
time  after  the  war,  German  exports  will  be  out- 
lawed among  our  present  enemies.  .  .  .  The  in- 
trinsic quality  of  exported  goods  must  be  typic- 
ally German;  their  external  garb,  for  better  or 
for  worse,  wilt  have  to  be  anonymous — neutral. 

This  scheme,  in  full,  is  now  being  put  into  effect, 
as  official  reports  to  our  government  show.  Ger- 
many is 

Buying  control  of  neutral  concerns  of  all  kinds. 

Organizing  new  concerns,  under  neutral  colors. 

Buying,  pirating  or  imitating  neutral  or  Allied 
trademarks  and  labels. 
•     Using  neutral  camouflage  to  cover  her  agents. 

Under  all  this  neutral  coloring  is  always  the  Ger- 
man power,  and  Germany  is  taking  the  greatest 
pains  to  see  that  the  camouflage  shall  not  weaken 
her  control  in  any  way.  At  a  recent  trial  of  three 
Germans  in  Bergen,  Norway,  they  testified  that 
failure  to  obey  the  orders  from  Berlin,  in  no  matter 
what  part  of  the  world  they  might  be,  and  even  if 
they  were  ordered  to  commit  crime,  meant  certain 
death.  Germany  recently  tried  for  treason  Ger- 
mans who  held  stock  in  a  neutral  concern,  the 
Fagersta  Bruks  A/B,  because  they  could  not  prevent 
the  neutral  managers  of  that  concern  from  trading 
with  the  Allies.  Germany  holds  her  grip  tight. 


56  GERMANY'S  NEW  WAR 

Neutrals  Organize  in  Their  Own  Defense 

The  German  infiltration  of  the  neutral  countries 
to  establish  bases  for  her  commercial  war  has 
already  caused  defensive  action  from  the  business 
men  in  these  countries.  They  fear  that  as  the  world 
comes  to  learn  of  the  tricks  resentment  will  fall 
on  the  genuine  neutrals,  and  that  to  avoid  buying 
German  goods  the  world  will  avoid  all  that  comes 
from  the  countries  where  the  Germans  operate. 

An  example  of  this  defensive  organization  is  the 
Syndicat  pour  1'Exportation  Suisse,  which  has 
adopted  a  collective  trademark  to  go  on  all  Swiss 
goods,  and  has  formed  an  elaborate  organization 
to  make  sure  that  the  mark  does  not  go  on  any 
German  goods.  One  of  the  most  dangerous  of  the 
German  schemes  is  to  have  the  goods  made  in  Ger- 
many, all  except  the  assembling  or  finishing,  and 
then  to  have  the  final  process  in  the  neutral  country, 
this  process  to  include  the  putting  on  of  a  neutral 
trademark.  To  meet  this  the  S.  P.  E.  S.  has  ruled 
that  its  mark  can  be  used  only  when  two-thirds 
of  the  capital  of  the  company  is  Swiss,  and  the 
goods  have  been  entirely  made  in  Switzerland  by 
Swiss  workmen. 

The  German  penetration  has  already  covered  the 


HIDING  BEHIND  THE  NEUTRALS       57 

four  northern  neutrals,  Holland,  Denmark,  Norway 
and,  apparently  to  a  less  extent,  Sweden;  it  has 
overrun  Switzerland,  and  eaten  deep  in  Spain.  It 
is  now  reaching  out  for  a  firm  footing  in  Poland, 
Hungary,  Rumania,  the  Ukraine  and  Russia. 

Official  Reports  Show  Big  Campaign 

The  extent  of  the  German  activities  along  these 
lines  is  startling  when  taken  in  connection  with  the 
pleas  of  bankruptcy  which  come  from  Berlin.  Here 
are  a  few  excerpts  from  official  reports : 

Montreux,  Switzerland. — The  Germans  are 
buying  up  bankrupt  Swiss  concerns  and  running 
them  under  the  original  Swiss  names.  They  have 
got  the  trade  of  this  country  and  are  likely  to 
keep  it.  ...  There  are  indications  that  Germany 
has  been  very  active  in  her  attempts  to  establish 
close  post-bellum  relations  with  the  Allies 
through  Switzerland.  .  .  .In  all  these  activities 
Germans  appear  to  have  unlimited  capital. 

Copenhagen — The  Germans  are  sly  and 
shrewd.  Long  ago  they  made  us  a  German  vas- 
sal. Gold  stolen  in  Belgium  and  Russia  has 
smoothed  the  way.  They  have  erected  meat  fac- 
tories, milk  factories  and  frozen  fish  factories, 
so  that  citizens  here  can  for  days  and  days  not 


58  GERMANY'S  NEW  WAR 

get  a  pound  of  meat  or  a  fish,  and  only  on  rare 
occasions  a  pint  of  milk.  Branch  factories  of 
the  great  industrial  works  in  Hunland  are  built 
here,  so  that  they  will  turn  out  "Danish  products" 
to  avoid  suspicions.  They  are  buying  up  shares 
everywhere  and  offering  large  rewards  to  those 
shipowners  who  will  loan  them  their  ships  to 
sail  under  the  Danish  flag,  but  with  German 
officers  aboard. 

These  examples  might  be  extended  indefinitely. 
Germans  have  bought  an  island  near  Copenhagen 
for  a  shipyard.  They  are  buying  up  the  Dutch 
river  craft.  They  are  building  textile  plants 
throughout  Switzerland,  and  equipping  some  of 
them  with  machinery  stolen  from  Belgium.  Stinnes 
&  Co.,  of  Hamburg,  are  reported  behind  a  big  new 
shipbuilding  plant  at  Landskwina,  Sweden.  There 
have  been  indications  that  even  in  America  a  re- 
cent attempt  to  buy  up  control  of*a  big  neutral 
steamer  line  was  backed  by  German  money. 


German  Companies  Under  Neutral  Names 

Then  there  is  the  system  of  forming  new  com- 
panies, under  neutral  names,  to  push  German  trade. 
Legal  proof  against  most  of  these  is  lacking,  but 
suspicion  is  strong.  To  illustrate,  there  is  the  case 


HIDING  BEHIND  THE  NEUTRALS       59 

of  a  big  Scandinavian  company,  established  in 
1916.  Though  it  has  a  capital  of  only  a  few  mil- 
lion kronen,  it  has  already  established  connections 
with  somewhere  between  fifty  and  a  hundred  con- 
cerns— the  exact  number  is  not  known — all  over 
the  world,  including  America  and  the  Allied  coun- 
tries. The  plan  is  to  put  capital  into  exporting  and 
importing  houses  abroac1  and  then  take  over  control 
of  their  contracts.  There  are  indications  that  the 
idea  is  not  to  buy  control  of  the  firms,  but  to  put 
in  just  enough  money  to  carry  them  through  some 
pinch,  and  get  an  influence  out  of  all  proportion 
to  the  investment.  This  influence,  of  course,  will 
be  used  to  push  those  goods  in  which  the  company 
is  interested. 

This  company  has  never  been  on  the  enemy  trad- 
ing list,  though  a  previous  concern  organized  by  the 
same  men,  was  blacklisted.  By  August  I,  1918, 
it  was  estimated  that  the  total  capital  of  the  firms 
with  which  it  was  affiliated  was  close  to  a  hundred 
million  kronen.  It  is  backed  by  a  foreign  bank 
which  before  the  war  was  the  center  of  German 
financial  interest  in  the  country  and  is  suspected  of 
being  part  of  a  German  trust. 

There  are  several  other  concerns  under  similar 
suspicion.  Of  course,  if  legal  proof  had  appeared 


60  GERMANY'S  NEW  WAR 

before  the  signing  of  the  armistice  they  would  have 
been  put  on  our  enemy  trading  list. 

Neutral  Trademarks  Bought  or  Stolen 

The  game  of  buying  trademarks  has  gone  on 
merrily.  In  Holland  they  are  constantly  register- 
ing both  trademarks  and  labels,  which  look  like 
neutral  marks.  A  report  from  Denmark  tells  of 
similar  work  there,  where  the  Germans  own  the 
rights  to  the  use  of  certain  Danish  names.  An- 
other report  states  that  goods  are  already  stored  in 
Scandinavia  for  export  under  false  trademarks. 

In  particular,  Germany  is  to-day  manufacturing 
from  American  patents  such  things  as  typewriters, 
sewing  machines,  adding  machines  and  other  dis- 
tinctively American  articles,  and  she  is  putting 
them  out  under  American  trademarks,  which  she 
seized  along  with  the  American  patents  when  we 
entered  the  war. 

Big  Drive  Made  for  Neutral  Shipping 

The  German  effort  to  get  control  of  neutral  ship- 
ping, both  for  war  and  post-war  use,  has  been  tre- 
mendous, and  till  the  signing  of  the  armistice  met 
with  great  success.  Her  method  was  to  supply  to 


HIDING  BEHIND  THE  NEUTRALS       61 

the  shipyards  of  adjoining  neutrals  material  which 
they  had  to  have  for  the  repair  or  construction  of 
ships,  but  she  put  heavy  conditions  on  the  ships  so 
constructed  or  repaired.  Here,  for  instance,  are 
the  terms  on  which  she  sold  materials  to  a  certain 
neutral  yard,  the  terms  to  apply  to  all  vessels  either 
built  or  repaired: 

The  ship  not  to  be  used  while  Germany  is  at 
war. 

Germany  to  be  informed  of  any  change  in  the 
name  or  build  of  the  ship. 

Germany  to  have  the  right  to  purchase  the  ves- 
sel at  any  time  within  four  years  of  the  close 
of  the  war. 

Any  violation  of  the  conditions  to  be  punish- 
able by  a  fine  of  800  kronen  per  ton  of  the  ship. 

Germany  must  approve  any  sale  of  the  vessel. 

German  courts  must  decide  all  issues  concern- 
ing it. 

Any  purchaser  must  accept  these  terms. 

Three  yards  are  known  to  have  accepted  these 
terms.  Another  is  suspected. 

This  scheme,  however,  has  been  partly  taken  care 
of.  In  the  first  armistice  agreement  the  Allies  took 
pains  to  attack  it  instantly.  Paragraph  32  provides : 

The  German  government  will  notify  the  neu- 
tral governments  of  the  world,  and  particularly 


62  GERMANY'S  NEW  WAR 

the  governments  of  Norway,  Sweden,  Denmark 
and  Holland,  that  all  restrictions  placed  on  the 
trading  of  their  vessels  with  the  Allied  and 
associated  countries,  whether  by  the  German 
government  or  by  German  private  interests,  and 
whether  in  return  for  specific  concessions,  such 
as  export  of  ship-building  materials  or  not,  are 
immediately  cancelled. 


Drummers  to  Go  Out  Under  Forged  Passports 

Germany  seems  to  have  felt  no  doubt  that  her 
schemes  would  work,  and  has,  as  usual,  boasted 
about  some  of  them.  Here  is  a  report  from  a 
neutral  capital  dated  three  days  before  the  signing 
of  the  armistice,  when  the  whole  world,  and 
particularly  Germany,  knew  that  the  end  of  the 
war  was  at  hand: 


There  are  300,000  Germans  here,  all  ready 
to  rush  into  France  and  England  to  be  received 
with  open  arms,  so  they  say — and  if  they  cannot 
go  in  as  Germans  they  go  in  on  forged  passports. 
(Note:  Other  reports  show  that  immediately 
after  the  signing  of  the  armistice  "neutral"  agents 
flooded  Italy  in  particular,  selling  camouflaged 
German  goods  far  under  the  market  price.)  If 
they  cannot  manage  that  they  will  trade  here  as 
neutrals  and  pay  for  all  their  material  in  French 
and  English  banknotes.  They  have  bought  bil- 


HIDING  BEHIND  THE  NEUTRALS        63 

lions  of  these  notes,  I  now  hear,  for  this  purpose. 
All  neutral  countries  are  Germanized,  ready  to 
start  operations,  and  all  raw  materials  will  be 
snapped  up  by  Swiss,  Dutch,  Swedes  and  Spanish. 

There  is  another  phase  of  German  plotting 
among  the  neutrals  which  hits  at  American  exports, 
but  not  at  our  home  trade.  Throughout  the  war 
the  Germans  have  been  supplying  small  quantities 
of  certain  products — camera  films,  dyes,  machinery, 
drugs,  coal,  and  even  sugar — to  neutral  firms  which 
found  their  American  or  Allies  supplies  cut  off. 
In  return  they  have  demanded  agreements  from 
these  neutrals  to  continue  their  purchases  from  the 
Germans  after  the  war,  and  have  got  them.  Isaac 
Marcosson  reported  recently  that  most  of  these 
agreements  were  beyond  reach  of  any  treaty  provi- 
sion, and  that  the  benficiaries  of  the  German  "kind- 
ness" would  keep  their  promises,  whether  forced 
to  or  not 


CHAPTER  VI 
THE  HUNS'  TRADE  SPIES  IN  AMERICA 

PRACTICALLY    COMPLETE    ESPIONAGE    SYSTEM     COV- 
ERED   EVERY     PHASE    OF    AMERICAN     BUSINESS 

LIFE ONE  COMPANY  FORMED  SOLELY  FOR  THIS 

PURPOSE — PAYING  A  PROFIT  TO  OUR  BETRAYERS 

TREACHERY        OF        GERMAN        COMMERCIAL 

TRAVELERS INSURANCE      COMPANIES,      BANKS 

AND  SHIPPING  FIRMS  ALL  HELPED 

German  industries  must,  therefore,  be  con- 
stantly informed  about  such  facts  as  these  (every 
kind  of  commercial  secret).  ...  It  is  self-evi- 
dent that  for  this  purpose  the  industrial  federa- 
tion will  not  only  try  to  enter  into  official 
relationships  and  those  of  a  semi-official  nature, 
but  that  it  will  devote  special  care  to  making  sure 
of  private  connections  which  have  a  deeper  in- 
sight into  the  special  conditions  of  each  case. 

Thus  diplomatically  does  Herzog,  spokesman  for 
German  industrial  aggression,  lay  down  the  principle 

64 


THE  HUNS'  TRADE  SPIES  IN  AMERICA    65 

of  espionage.  It  is  to  be  one  of  the  foundation 
stones  of  the  new  industrial  empire  for  which  he 
plans  and  toward  which  Germany  is  working. 

In  this,  as  in  so  many  other  things,  he  simply 
states  and  reduces  to  a  centralized  and  Teutonic 
system  what  is  already  the  German  practice.  In- 
vestigations into  German  business  in  America  show 
that  even  before  the  war  she  had  a  practically  com- 
plete espionage  system  covering  American  business 
life.  It  was  a  system  that  was  not  "sniping" — its 
branches  worked  together,  and  the  information 
they  obtained  was  available  to  almost  any  German. 

These  investigations  have  shown  that,  before  the 
war,  German  espionage  in  America  covered: 

Specifications  and  plans  of  all  big  manufacturing 
plants  to  be  erected. 

Blueprints  of  almost  all  plans  for  American 
machinery. 

Every  step  taken  concerning  chemicals,  drugs  and 
dyes. 

Movements  and  loading  of  ships — that  is,  our 
export  trade. 

Full  commercial  information  about  every  im- 
portant American  business  house. 

And  a  great  mass  of  miscellaneous  espionage, 
covering  new  patents,  salesmen's  lists  and  in  gen- 


66  GERMANY'S  NEW  WAR 

eral  almost  everything  that  a  trade  rival  could  want 
to  know. 


Information  Procured  by  Devious  Methods 

This  information  the  Germans  procured  by  the 
most  devious  methods.  In  at  least  one  case  a  com- 
pany was  apparently  formed  for  the  sole  purpose 
of  espionage  (it  paid  dividends,  too),  and  informa- 
tion it  secured  was  promptly  and  systematically 
forwarded  to  Germany.  In  the  chemical  lines  Ger- 
man spies  under  the  guise  of  experts  seeking  work 
were  introduced  into  our  shops,  factories  and 
laboratories.  The  voluble  German  commercial 
traveler,  getting  a  job  on  the  strength  of  his 
familiarity  with  languages  and  with  some  special 
field,  would  send  his  sample  cases  and  the  lists  of 
people  from  whom  he  got  orders  for  American 
goods  to  his  real  employers  in  Berlin,  who  would 
make  efficient,  if  dishonest,  use  of  them. 

"In  many  of  the  large  German  companies  taken 
over  by  the  Alien  Property  Custodian,"  A.  Mitchell 
Palmer  reports,  "it  was  found  after  investigation 
that  espionage  was  one  of  the  chief  functions. 
Every  scrap  of  information  of  commercial  or  mili- 
tary value  to  Germany  was  carefully  gathered  by 


THE  HUNS'  TRADE  SPIES  IN  AMERICA    67 

the  representatives  of  these  concerns  in  this  coun- 
try and  quickly  forwarded  to  the  home  offices  in 
Germany.  The  German  agents  were  particularly 
keen  on  gathering  information  that  would  help  in 
Germany's  commercial  warfare. 

"Once  in  Germany  this  information  was  care- 
fully card-indexed  for  the  use  of  German  manu- 
facturers. Bulletins  of  commercial  information 
were  also  prepared  and  placed  at  the  disposal  of 
the  German  manufacturer.  In  Germany  the  collec- 
tion of  all  information  is  under  a  bureau  which  is 
controlled  and  financed  by  the  great  German  banks, 
such  as  the  Dresdner,  the  Disconto  and  Reichs- 
bank." 


Spies    Made    Handbook   for   Commercial    Burglar 

This  bureau,  known  as  the  Schimmelpfeng  In- 
stitut,  is  one  of  the  most  deadly  of  Germany's  com- 
mercial weapons.  Its  information  is  available  only 
to  those  approved  by  the  banks.  And  it  is  said — 
little  real  data  about  it  have  been  unearthed — that 
it  covers  not  only  the  commercial  standing,  but  the 
political  affiliations,  religious  beliefs  and  suscep- 
tibility to  corruption  of  every  official  of  every  firm 


68  GERMANY'S  NEW  WAR 

whose  business  is  at  all  worth  having.  It  is  a  hand- 
book for  commercial  burglars. 

One  of  the  best  instances  of  a  plant  established 
in  America,  apparently  for  espionage  purposes,  and 
certainly  with  a  regularly  organized  espionage 
branch,  is  that  of  the  Orenstein-Arthur  Koppel 
Company.  This  was  a  branch  of  a  concern  in 
Germany,  which  has  similar  branches  all  over  the 
world,  so  that  practically  every  civilized  nation  has 
been  subjected  to  the  same  abuse. 

This  concern  manufactured  light  railways  and 
other  inside  transmission  equipment  for  factories. 
It  would  bid  on  practically  every  job  in  the  country. 
To  bid  it  must  have  blue  prints  of  the  entire  plans 
of  the  factory  so  that  it  could  design  and  estimate 
costs  on  the  equipment  desired.  These  blue  prints 
were  regularly  forwarded  to  Germany. 

Confidential  Plan  Sent  to  German  Staff 

This  company  installed  equipment  in  practically 
all  American  munitions  plants,  steel  plants  and 
kindred  concerns.  It  had  contracts  with  the  West- 
inghouse  Company,  the  United  States  Steel  Cor- 
poration, the  Du  Pont  Works  and  nearly  half  the 
big  industrial  plants  now  operating  in  this  country. 


THE  HUNS'  TRADE  SPIES  IN  AMERICA    69 

The  German  general  staff  and  the  commercial  in- 
formation bureau  now  have  plans  of  all  these.  The 
managers  of  the  concern  are  all  in  internment 
camps. 

Another  concern  that  had  a  high  commercial 
espionage  value  was  the  Becker  Steel  Company  of 
America.  This  company  had  patent  monopolies  on 
the  processes  for  making  high  speed  tool  steel  and 
supplied  practically  all  of  that  vital  material  for 
America.  This,  of  course,  gave  it  wide  informa- 
tion regarding  the  needs,  processes  and  products  of 
the  factories  it  supplied.  This  steel  is  required  in 
the  manufacture  of  aeroplane  and  auto  motors  and 
dental  and  surgical  instruments.  The  control  of 
this  material  of  course  also  gave  Germany  a  heavy 
strategic  advantage  as  against  American  concerns. 

Almost  Every  Hun  Dye  Expert  a  Spy 

Almost  every  German  dye  and  chemical  expert 
or  worker  was  a  spy,  Mr.  Palmer  reports.  There 
is  little  doubt  that  many  of  them  are  still  located 
in  our  factories. 

"The  chemical  industry  was  a  natural  center  for 
espionage,  and  this  had  been  true  long  before  we 
entered  the  war,"  says  Mr.  Palmer,  "indeed,  long 


70  GERMANY'S  NEW  WAR 

before  the  war  began.  The  relation  between  the 
German  government  and  the  great  chemical  houses 
was  so  close  that  representatives  of  the  industry 
were  naturally  almost  direct  representatives  of  the 
government,  and  their  work  in  this  country  gave 
them  unequalled  opportunities  for  examining  our 
industries  from  within.  Customers  of  the  German 
export  houses  were  constantly  in  need  of  expert 
advice  in  regard  to  the  processes  in  which  their 
goods  were  used.  The  advising  expert  supplied  by 
the  German  houses  naturally  saw  everything,  and 
what  he  learned  was  seldom  concealed  from  his 
government. 

"After  the  war  began  the  industry  became  not 
only  a  center  of  espionage  but  of  propaganda  and 
of  direct  governmental  activity." 

It  made  bombs,  among  other  things. 

This  espionage,  of  course,  covered  not  only 
American  drugs,  dyes  and  chemicals,  but  the  whole 
textile  industry,  the  leather  business,  the  printing 
trade,  through  inks,  and  all  other  forms  of  business 
in  which  any  delicate  use  is  made  of  chemicals. 

Great  advantages  for  espionage  over  the  mining 
industry  were  held  by  the  Roessler-Hasslacher 
Company,  which  supplied  all  cyanide  in  America, 
and  will  be  discussed  later.  It  could  tell  to  a  pound 


THE  HUNS'  TRADE  SPIES  IN  AMERICA    71 

the  output  of  every  mine,  and  of  course  gathered 
much  other  information. 

Another  "pipe  line"  was  in  the  big  magneto  com- 
panies, the  Bosch  and  Eisemann.  Through  patents 
they  had  a  most  powerful  position  in  America,  and 
there  were  few  gas  engines  designed  on  which  they 
did  not  receive  full  information. 


German  Spies  in  U.  S.  Drafting  Rooms 

There  was  one  other  form  of  espionage  widely 
practised,  though  it  did  not  center  in  any  one  Ger- 
man concern,  and  thus  did  not  come  within  the 
scope  of  the  alien  property  office  or  of  the  War 
Trade  Board.  This  was  the  stealing  of  secrets 
from  drafting  rooms.  Germans  make  splendid 
draftsmen,  and  it  would  be  hard  to  find  a  drafting 
room  anywhere  in  America  without  a  high  grade 
workman  or  two  of  German  blood.  Often  he  is 
the  foreman.  It  is  impossible  to  guess  how  many 
of  these  were  spies,  but  it  is  known  that  prints  of 
American  drawings  of  the  most  confidential  kind 
were  continually  finding  their  way  into  Germany. 
After  the  war  there  was  a  tremendous  weeding  out, 
and  the  Department  of  Justice  began  it,  with  start- 


72  GERMANY'S  NEW  WAR 

ling  results,  in  our  own  government  as  well  as  pri- 
vate munitions  plants. 

The  sending  to  Germany  of  confidential  informa- 
tion and  samples  secured  by  a  camouflaged — or 
often  uncamouflaged — German  salesman,  may  be 
regarded  as  "sniping."  But  there  were  other  means 
of  getting  information  on  the  borders  of  the  com- 
mercial field,  that  were  of  great  importance  and 
value. 


Insurance  and  Banks  Used  in  Spy  System 

One  of  these  was  through  insurance  of  indus- 
trial plants,  and  particularly  of  ships.  The  custom 
of  splitting  big  risks  among  many  companies  made 
this  easy,  for  a  German  concern  could  take  only 
a  small  part  of  the  risk  and  at  the  same  time  re- 
ceive all  the  information  about  the  property  insured. 
This  information,  in  case  of  ships,  included  full 
specifications  of  the  ship,  and  even  a  manifest  of 
the  cargo,  itemized  as  to  value.  In  case  of  a  fac- 
tory, it  covered  full  plans  of  the  plant  and  inven- 
tories of  the  stock  on  hand.  This  activity  was 
particularly  marked  in  the  first  years  of  the  war. 

Another  espionage  method  was  through  the  use 
of  banks,  which  turned  over  to  Germany  what  any 


THE  HUNS'  TRADE  SPIES  IN  AMERICA    73 

other  bank  would  regard  as  confidential  informa- 
tion. This,  like  the  insurance,  was  in  its  infancy, 
though  getting  well  started.  The  most  conspicuous 
example  of  it  was  the  Transatlantic  Trust  Com- 
pany, which  not  only  maintained  thousands  of 
agents,  but  carried  on  an  active  propaganda,  and 
particularly  stimulated  the  draining  back  to  the 
Central  Powers  of  hundreds  of  millions  of  dollars 
earned  and  saved  by  their  immigrants  here. 

One  more  scheme  deserves  mention,  for  its  pos- 
sibilities at  least.  The  Germans  were  fast  getting 
a  monopoly  of  the  transatlantic  wireless  field — that 
is,  they  were  making  sure  that  a  great  part  of  the 
most  confidential  business  messages  would  go 
through  their  hands.  How  important  this  may  be 
is  shown  by  the  fact  that  the  German  wireless  mes- 
sages have  been  the  most  important  single  clew  for 
the  Alien  Property  Custodian  in  digging  up  the 
German  property  here. 

Germany  has  already  begun  sending  out  new 
spies,  to  take  the  place  of  those  she  has  lost. 


CHAPTER  VII 
GERMAN  ALLIES  IN  THIS  COUNTRY 

SECURE  BASIS  HERE  FOR  COMMERCIAL  INVASION — 
PROPAGANDA  MACHINE  BACK  AT  ITS  OLD  WORK 
SPY  SYSTEM  BEING  RE-ORGANIZED FEW  GER- 
MAN AGENTS  DRIVEN  OUT THE  NATURAL 

FRIENDLINESS  OF  THE  GERMAN-AMERICANS 

GERMANY  is  re-entering  the  commercial  and  in- 
dustrial field  in  America  with  tremendous  factors 
in  her  favor  here  as  well  as  abroad.  This  is  in 
spite  of  the  waj  handicaps  which  have  been  so  much 
emphasized,  especially  in  her  own  propaganda. 
Her  position  will  not  be  that  of  1914,  but  she  has 
here  a  broad  and  secure  basis  on  which  to  build, 
and  the  means  for  the  rebuilding  of  the  great  ma- 
chine was  that  smashed  by  the  work  of  the  Alien 
Property  Custodian,  the  War  Trade  Board,  the  In- 
telligence services  and  the  Department  of  Justice. 

She  has  here  money,  an  organization,  millions  of 
74 


GERMAN  ALLIES  IN  THIS  COUNTRY     75 

sympathizers  and  a  host  of  men  who,  for  one  rea- 
son or  another,  see  possible  advantage  to  themselves 
from  alliance  with  the  new  trade  invasion. 

First,  as  to  money.  The  Alien  Property  Custo- 
dian has  seized  all  that  can  be  located,  but  there 
are  hundreds  of  millions  that  he  has  not  been  able 
to  touch. 

This  is  not  all.  Evidence  was  put  before  the 
Overman  committee  recently  that  the  subjects  of 
the  Central  Empires  in  this  country  have  been 
hoarding  savings  ever  since  the  opportunity  to  send 
them  home  was  cut  off,  and  that  the  German  and 
Austrian  bankers  were  counting  heavily  on  getting 
these  funds  to  use  in  starting  the  trade  war.  These 
funds  are  estimated  at  the  tremendous  total  of  a 
billion  and  a  half  dollars. 

There  are  even  official  German  and  Austrian 
funds  still  in  America.  Much  of  the  money  left 
by  Bernstorff,  Intelligence  officers  believe,  has 
neither  been  used  nor  seized.  And  as  late  as  last 
August  this  government  came  into  possession  of 
a  report  from  the  Commercial  Attache  of  Austria 
in  a  neutral  country  on  the  expenditure  of  Aus- 
trian official  funds  in  America,  together  with  a 
promise  for  a  statement  of  the  sums  remaining  at 
a  later  date. 


76  GERMANY'S  NEW  WAR 

All  these — something  around  two  billion  dollars, 
are  ready  for  Hun  ammunition. 

Propaganda  Machine  Already  Back  at  Work 

There  is  next  in  importance  the  German  or- 
ganization. The  great  commercial  machine  has 
been  smashed  and  the  propaganda  machine  partly 
destroyed.  But  with  the  signing  of  the  armistice 
German  propaganda  reappeared  in  a  wave  and  has 
been  going  ever  since. 

With  the  ratification  of  the  peace  treaty  the  hun- 
dreds of  German  agents  who  have  been  in  intern- 
ment camps  will  be  released.  Some  of  them,  under 
present  government  plans,  will  be  deported.  But 
many  will  stay  here,  and  it  has  never  been  impos- 
sible for  Germany  to  replace  her  agents  here,  even 
during  the  war. 

Not  a  German  spy  has  been  shot  or  hung  in 
America,  and  the  sentences  given  even  the  biggest 
of  them,  like  Franz  von  Rintelen,  have  been  only 
for  a  year  or  two.  The  German  propaganda  ma- 
chine here,  and  much  of  the  commercial  organiza- 
tion, as  distinct  from  the  invested  concerns,  will 
soon  be  intact  and  running. 

It  will  have  the  old  leaders.     Dr.  Albert,  who 


GERMAN  ALLIES  IN  THIS  COUNTRY     77 

conducted  the  propaganda  here  till  we  entered  the 
war,  has  entered  the  German  foreign  office,  under 
the  new  government,  and  it  is  officially  stated  that 
this  is  because  of  his  familiarity  with  the  American 
situation.  Bernstorff  and  Dernburg  are  in  places 
of  power  for  the  same  reason,  while  the  whole  Ger- 
man home  organization  is  filled  with  men  whose 
chief  qualification  is  their  supposed  ability  to 
"handle"  the  American  mind  and  psychology. 


Commercial  Spy  System  Restored 

Already  the  old  German  commercial  spy  system 
is  being  reconstructed,  both  in  America  and  other 
countries. 

"Many  Germans  and  Austrians,  recently  natural- 
ized, have  been  made  export  managers  of  big 
American  houses,"  says  a  recent  official  report. 
"This  is  because  they  are  expert  linguists.  Mostly 
these  were  commercial  travelers  in  South  America 
and  the  Orient,  who  agreed  to  turn  over  their  con- 
nections to  the  American  houses."  The  report  then 
names  several  places  where  this  has  occurred. 

It  will  be  equally  simple  for  these  men  to  return 
to  the  German  and  Austrian  houses  and  take  with 


78  GERMANY'S  NEW  WAE 

them  their  inside  knowledge  of  the  American  firms' 
business. 

Another  report  shows  that  the  great  German 
Allegemeine  Electricitats  Gesellschaft  has  engaged 
many  Swedish  engineers  to  learn  the  A.  E.  G.  busi- 
ness, and  then  scatter  all  over  the  world,  still  on 
the  A.  E.  G.  payroll,  but  ostensibly  free  to  act  as 
"under-cover"  agents,  getting  places  where  they  can 
gather  information  and  swing  contracts  to  the  Ger- 
man concern. 

Some  Americans  Will  Aid  Enemy 

Germany's  third  strength  is  in  the  selfish  interests 
of  certain  Americans.  The  Alien  Property  Cus- 
todian has  found  that  many  of  the  most  dangerous 
enemy  agents  here,  in  the  business  world,  were  of 
long-standing  American  parentage,  often  not  even 
of  German  blood.  Not  all  of  these  have  been 
eliminated  and  some  are  still  known  to  be  waiting 
to  make  sure  that  it  would  not  be  more  worth  their 
while  to  resume  their  German  connections  than  to 
continue  the  loyal  course  into  which  they  have  been 
forced.  One  such  man,  who  had  worked  himself 
into  a  position  where  he  thought  he  would  be  able 
to  hold  up  both  Germany  and  America,  has  been 


GERMAN  ALLIES  IN  THIS  COUNTRY    79 

cleverly  outgeneraled  by  the  Alien  Property  office, 
but  he  is  still  dangerous  and  he  is  only  one  of 
several.  1 

In  a  similar  class  are  many  men  who  expect  the 
German  commercial  invasion  to  win,  and  hope  to 
share  the  spoils.  There  are  others  who  see  Ger- 
many and  Britain  as  rivals  on  American  soil  and 
will  help  Germany  against  our  Ally.  There  are, 
too,  the  men,  many  of  them  to-day  ignorant  that 
they  are  serving  Germany,  who  have  made  connec- 
tions with  the  German  trade  army  camouflaged 
under  the  colors  of  neutrals,  as  already  described. 

And  lastly,  there  are  still  German  concerns,  both 
here  and  abroad,  which  have  been  put  under  the 
cloak  of  neutral,  or  even  American  ownership,  and 
which  are  waiting  the  safe  and  proper  time  for 
retransfer. 

Greatest  Strength  Lies  in  Hyphenates 

But  Germany's  greatest  strength  here  lies  in  the 
sympathy  she  will  still  find  among  the  12,000,000 
men  and  women  of  Teutonic  blood  in  America. 
Her  emigrants  have  always  been  one  of  Germany's 
greatest  trade  assets.  Henri  Hauser,  the  great 
French  economist,  whose  "Germany's  Commercial 


80  GERMANY'S  NEW  WAR 

Grip  on  the  World"  is  the  standard  work  on  the 
German  machine  as  it  existed  when  war  broke  out, 
says  of  the  hyphenates: 

It  happened  that  Germany,  on  the  morrow  of 
her  sudden  industrialization,  found  in  every 
corner  of  the  globe  groups  of  customers  ready  to 
hand,  speaking  her  language,  accustomed  to  her 
products,  fully  disposed  to  sound  her  praises 
abroad — in  short,  armies  of  consumers  and  com- 
mercial travelers.  .  .  .  Those  spontaneous  colo- 
nies have  been  an  initial  base  of  operation  for 
German  commerce. 

The  restoration  of  German  consciousness 
among  these  Germans  abroad  has  had  commer- 
cial consequences  of  incalculable  value. 

It  is  no  reflection  on  the  very  general  and  de- 
voted loyalty  which  the  German-Americans  showed 
during  the  war  to  say  that  the  signing  of  the  peace 
means  a  new  attitude  to  many  of  them.  Till 
America  entered  the  conflict  the  ties  of  blood,  of 
education  and  of  interest  in  many  cases  made  them 
very  generally  sympathetic  with  Germany  and  the 
ending  of  the  armed  conflict  will  go  far  toward 
permitting  the  return  of  their  affection  to  the  people 
and  products  of  the  Fatherland.  That  this  has  been 
true  is  shown  in  the  attitude  of  the  German 


GERMAN  ALLIES  IN  THIS  COUNTRY     81 

language  press  and  of  many  business  men  of  Ger- 
man blood. 

This,  of  course,  means  much  in  view  of  the  Ger- 
man commercial  invasion.  Men  who  did  not  be- 
lieve, who  could  not  see,  that  Germany  was  mak- 
ing an  armed  attack  on  the  world,  even  when  it 
was  demonstrated  in  terrible  action,  will  not  recog- 
nize the  new  warfare  or  feel  the  new  menace. 
Many  in  addition,  who  did  see  and  fight  Ger- 
many's imperialism,  now  believe  that  that  has  gone 
with  the  Kaiser,  and  will  naturally  and  blamelessly 
aid  what  they  believe  is  a  new  Germany. 

During  the  fighting  American  officials  found  the 
German-Americans  in  business  no  better  and  no 
worse  than  other  business  men.  Much  of  the  most 
abominable  crookedness  came  from  them,  as  did 
much  of  the  most  self-sacrificing  loyalty  and 
patriotism.  But  there  seems  no  doubt  among  those 
in  touch  with  the  situation  that  in  the  next  few 
years  Germany  will  find  here  as  much  blood-sup- 
port as  she  ever  did. 


CHAPTER  VIII 

DYES  AND  CHEMICALS—THE  HUNS' 
STRONGHOLD 

BILLIONS  OF  DOLLARS  WORTH  OF  AMERICAN  BUSINESS 
CONTROLLED EVEN  OUR  HEALTH  IN  GER- 
MANY'S POWER HELPING  THE  KAISER  TO  PRE- 
PARE FOR  THE  GREAT  WAR — THE  CENTER  OF 

ESPIONAGE        AND        PROPAGANDA        SYSTEMS 

BRIBERY     COMMON — COMPETITION     KILLED     BY 
EVERY  AVAILABLE    MEANS 

WHEN  the  great  war  began  Germany  had  in- 
vested in  the  dye  and  chemical  trade  in  this  country 
not  more  than  $25,000,000,  a  tiny  sum  in  business. 
But  with  this  tiny  amount  she  had  held  a  pistol 
to  the  head  of  $3,000,000,000  worth  of  American 
production,  prevented  our  establishment  of  any 
adequate  manufacture  of  war  explosives  and  made 
us  absolutely  dependent  on  her  for  drugs  vital  to 
our  health  or  our  recovery  from  sickness. 

82 


DYES  AND  CHEMICALS  83 

This  industry  furnishes  the  best  proof  of  the 
keenness  of  Germany's  commercial  strategy,  for  the 
chemical  industry  is  the  right  hand  of  war.  The 
manufacture  of  drugs  and  dyes  from  coal  tar  is 
a  marvelously  complicated  process  and  there  are 
great  quantities  of  by-products,  which  are,  or  easily 
may  be  made  into,  explosives.  These  form  by  far 
the  greatest  part,  in  weight,  of  the  whole  produc- 
tion. Dyes  made  without  explosives,  or  explosives 
made  without  dyes  to  help  pay  the  cost,  become 
doubly  expensive. 

Thus  Germany,  storing  explosives,  kept  down  the 
price  of  her  dyes.  Thus,  during  the  war,  making 
explosives,  she  stored  dyes  to  be  thrown  on  the 
market  to-day.  Thus,  also,  she,  for  years,  pre- 
vented America  from  establishing  great  chemical 
plants  and  hopes  to  break  down  those  we  now  have 
started. 

War  Also  Center  of  Spy  System 

In  another  sense  the  chemical  trade  served  the 
war  god,  as  well  as  the  commercial  needs.  It  was 
the  center  of  German  espionage,  managed  for 
twenty  years  by  Hugo  Schweitzer,  a  "consulting 
chemist"  of  the  Bayer  Company,  but  with  power 


84  GERMANY'S  NEW  WAR 

which  in  many  things  exceeded  that  of  an  am- 
bassador. He  handled  funds  running  into  the  mil- 
lions which  never  showed  on  the  books.  He  paid 
the  chemical  and  dye  men  throughout  the  country 
salaries  three  and  four  times  their  business  income. 
He  managed  the  German  propaganda. 

The  work  done  by  A.  Mitchell  Palmer  and 
Francis  P.  Garvan,  his  successor  as  Alien  Property 
Custodian,  and  by  the  War  Trade  Board,  has 
smashed  that  beautifully  built  chemical  machine. 
Thanks  to  Mr.  Garvan  and  the  men  who  worked 
with  him,  it  has  been  thoroughly  exposed.  The 
story  of  their  investigation  and  success  is  one  of 
the  most  dramatic  chapters  of  the  secret  history  of 
the  war,  but  it  may  not  yet  be  told. 

The  facts  they  have  revealed  have  amazed  even 
those  most  familiar  with  the  situation,  for  they 
show  an  enemy  (whether  in  peace  or  war)  that  was 
firmly  established  in  a  position  of  great  strategic 
power,  holding  up  American  business  for  an 
enormous  profit,  crushing  competition  by  every 
available  method,  a  center  of  espionage  and  propa- 
ganda and  of  crime  when  need  arose,  dodging  our 
taxes,  evading  our  law  and  hiding  under  American 
name  and  citizenship  through  all  manner  of  deceit 
and  camouflage. 


DYES  AND  CHEMICALS  85 

Germany's  Chemicals  Her  Greatest  Asset 

Germany's  estimate  of  the  value,  to  her,  for 
after-war  uses  of  the  chemical  industry  to  force 
Allied  business  to  meet  her  demands,  is  voiced  by 
Herzog: 

Those  raw  products  which  are  obtained  by 
the  use  of  chemicals,  however,  will  be  of  especial 
importance.  Thanks  to  the  marvelous  develop- 
ment of  German  science,  they  assure  a  monopoly 
to  German  industry — a  monopoly  the  use  of 
which  is  of  great  importance.  The  experiences 
of  the  war  thus  far  have  given  in  this  very 
connection  an  incontrovertible  proof  of  the  ab- 
solute dependence  of  the  foreign  countries  upon 
Germany.  .  .  .  With  few  exceptions  the  depen- 
dency of  foreign  countries  is  not  easy  to  prove. 
In  these  exceptions  are  included  certain  dyestuffs 
and  chemical  products.  .  .  .  Products  of  German 
origin  are  considered  for  purposes  of  protecting 
the  export  trade  primarily  if  they  are  absolutely 
indispensable. 

That  is  the  theory — here  is  the  plan  to  put  it  into 
practice,  as  expressed  by  the  "Farber-Zeitung,"  the 
dye  trade  paper  of  Germany: 

The  German  coal  tar  dyestuffs  industry  ought, 
after  the  conclusion  of  peace,  to  be  permitted 


86  GERMANY'S  NEW  WAR 

to  sell  dyestuffs  only  in  Germany,  Austria, 
Turkey  and  Bulgaria  until  the  German  textile 
factories  are  again  fully  occupied  and  all  ware- 
houses and  stores  and  all  concerns  are  again  fully 
supplied  with  good  white,  dyed  and  printed 
goods.  Only  then  would  it  be  permissible  to 
furnish  German  coal  tar  dyestuffs  to  neutral  or 
hostile  foreign  countries.  ...  If  foreign  coun- 
tries begin  again  too  soon  to  receive  good  Ger- 
man coal  tar  dyestuffs  they  might  easily  ruin  the 
business  of  the  German  export  trade  in  finished 
products.  ...  It  would  be  permissible  to  furnish 
dyestuffs  to  America  only  if  the  American  gov- 
ernment should  consent  to  bury  for  a  long  time 
the  unjustifiable  so-called  anti-trust  question  in 
connection  with  the  aniline  dye  interests. 


Industry  Busy  in  War  Plots  Here 

In  spite  of  the  facts  that  have  become  known 
as  to  the  war  activities  of  the  German  chemical 
interests,  few  people  have  yet  realized  how  tre- 
mendously useful  they  were  to  the  Kaiser  in  his 
war  against  America  on  American  soil.  Dr.  Hugo 
Schweitzer  and  his  propaganda  plots  are  known, 
as  are  Dr.  Scheele's  bomb  manufactures.  At  least 
two  of  the  chemical  companies,  the  Bayer  and  the 
Geisenheimer,  were  suspected  of  transmitting  code 
messages  under  the  guise  of  business.  Officers  of 


DYES  AND  CHEMICALS  87 

the  latter  concern  were  deep  in  the  councils  of  Boy- 
Ed,  von  Papen,  Albert,  et  al. 

Even  more  important  were  the  chemical  plots  en- 
gineered with  the  idea  of  preventing  the  manufac- 
ture in  this  country  of  munitions.  One  aimed  at 
the  manufacture  of  toluol  and  benzol — products 
essential  to  many  industries — so  that  there  would 
be  no  impetus  for  the  establishment  of  an  American 
plant  which  could  provide  them  for  explosives,  for 
which  they  are  indispensable.  A  plant  for  this  pur- 
pose was  built,  financed  by  the  Deutsche  Bank, 
through  Hugo  Schmidt,  and  did  supply  America — 
under  contracts  preventing  the  use  of  the  products 
for  explosives.  Thus  the  war  found  America  de- 
pendent on  a  German  plant  for  her  powder ! 

Another  anti-explosive  scheme  was  the  so-called 
"Chemical  Exchange  Associated,"  of  which  Thomas 
A.  Edison  was  the  target  .  Early  in  the  war  there 
was  a  great  shortage  of  phenol  (carbolic  acid)  and 
Mr.  Edison,  who  needed  much  in  his  business,  in- 
vented a  new  process  for  its  production  and  started 
manufacture  on  a  scale  that  left  him  a  big  surplus, 
which  easily  could  have  gone  into  the  making  of 
valuable  explosives.  The  German  ring  got  a  con- 
tract for  all  this  phenol,  and  to  prevent  its  reaching 
the  powder  factories  had  it  converted  into  other 


88  GERMANY'S  NEW  WAR 

non-explosive  products.     This  prolonged  the  car- 
bolic acid  famine,  to  the  great  distress  of  the  coun- 
try.   Incidentally  the  plot  paid  a  profit  of  $816,000. 
There  were  many  others. 

Our  Enemies  Even  in  Days  Before  War 

But  long  before  there  was  any  war  the  German 
chemical  invaders  were  our  enemies.  On  dyes  and 
coal  tar  drugs  the  Germans  had  a  practical 
monopoly — held  by  driving  every  American  effort 
along  these  lines  out  of  business.  On  heavy 
chemicals  the  situation  was  not  quite  so  bad,  though 
serious  enough. 

This  situation  was  used  to  derive  enormous 
profits,  the  dyes  in  particular  often  being  sold  here 
at  four  or  five  times  their  cost.  The  Bayer  Com- 
pany, for  instance,  after  paying  enormous  prices  to 
the  German  cartels  for  its  goods,  in  1914  made 
$2,702,391  profit  on  sales  of  $6,465,320,  while  the 
Synthetic  Patents  Company,  owned  by  it  and  used 
as  a  "milker,"  made  $1,177,242  on  $1,214,538  of 
sales — a  total  profit  of  nearly  $4,000,000  by  a  con- 
cern capitalized  at  $750,000.  On  another  of  its 
subsidiaries  the  profits  for  that  year  are  not  at  hand, 
but  the  Williams  &  Crowell  Color  Company  made 


DYES  AND  CHEMICALS  89 

$240,851  net  in  the  first  six  months  of  1918.  The 
total  turnover  of  the  dye  business  did  not  pass  $25,- 
000,000  a  year,  but  the  profits  were  probably  half 
of  that. 

All  of  the  six  big  German  chemical  houses  which 
operated  before  the  war — they  have  been  formed 
into  a  single  gigantic  trust  now — were  represented 
in  America  by  what  seemed  to  be  independent  firms, 
buying  from  them  under  exclusive  contracts,  but 
what  were  really  branches  under  absolute  control. 
The  Alien  Property  Custodian  caught  one  of  these 
concerns  and  seized  it,  because  it  had,  though  ap- 
parently entirely  American-owned,  wirelessed  to 
Berlin  asking  permission  to  raise  the  pay  of  some 
of  its  employes. 

Contract  Shows  How  Germans  Kept  Their  Grip 

The  following  contract  shows  the  method  by 
which  the  Germans  kept  their  cake  and  sold  it  too : 

Agreement  made  this  3Oth  day  of  June,  19 13, 
between  Adolph  KuttrofT,  of  the  City  of  New 
York,  of  the  first  part,  and  the  Badische  Aniline 
and  Soda  Fabrik,  a  corporation  duly  organized 
and  existing  under  the  laws  of  the  Grand  Duchy 
of  Baden,  Germany,  of  the  second  part,  wit- 
nesseth 


90  GERMANY'S  NEW  WAR 

The  party  of  the  first  part  agrees  that  if  he 
shall  die  or  for  any  reason  shall  cease  to  be  an 
officer  of  the  said  Badische  company  at  any  time 
prior  to  the  first  day  of  January,  1916,  he  or  his 
legal  representatives  shall  sell  the  stock  held  by 
him  in  the  said  Badische  company  to  the  party 
of  the  second  part  or  to  such  person,  firm  or 
corporation  as  it  may  designate,  on  payment  of 
the  par  value  thereof,  with  interest  at  6  per  cen- 
tum per  annum  from  the  first  day  of  the  current 
fiscal  year; 

It  is  further  agreed  that  the  party  of  the  first 
part  shall  not  sell  or  transfer  his  stock  of  said 
Badische  company  or  any  part  thereof,  nor  create 
nor  suffer  to  be  created  any  lien,  pledge  or  in- 
cumbrance  of  or  upon  the  said  stock  or  any  part 
thereof ; 

This  agreement  shall  also  apply  to  and  cover 
any  further  shares  of  the  Badische  company  the 
party  of  the  first  part  shall  hold  or  acquire  by 
any  increase  of  the  capital  stock  of  the  said 
Badische  company  or  otherwise,  as  well  as  to  the 
shares  now  held  by  the  party  of  the  first  part. 

M  second  agreement  of  even  date,  with  almost 
identifical  preamble,  provides: 

The  party  of  the  second  part  hereby  agrees 
that  it  will  not  sell,  directly  or  indirectly,  any  of 
such  dyestuffs,  chemicals  or  other  articles  out- 
side of  said  exclusive  territory,  and  that  it  will 
not  directly  nor  indirectly  deal  in  any  merchandise 


DYES  AND  CHEMICALS  91 

that  shall  or  may  come  into  competition  with  the 
articles  so  to  be  purchased  from  the  party  of  the 
first  part,  nor  will  it  or  any  of  its  officers  have 
any  interest  in  any  competing  firm  or  corporation. 
It  is  further  understood  and  agreed  that  when 
and  so  long  as  the  party  of  the  first  part  may  be 
a  creditor  of  the  party  of  the  second  part,  the 
party  of  the  first  part  shall  have  the  right  at  its 
own  cost  and  at  any  time  to  inspect  and  make 
or  cause  to  be  made  extracts  from  the  books  and 
documents  of  the  party  of  the  second  part.  .  .  . 

Another  agreement  of  even  date  and  like  that 
with  Kuttroff  is  made  between  the  Badische  Com- 
pany, of  New  York,  and  the  following  stockholders 
therein:  Herbert  W.  Reed,  15  shares;  George  M. 
Snow,  20;  A.  Lendle,  20;  Frederick  Kuttroff,  20; 
Rudolph  Reichard,  20;  Howard  L.  Waldo,  20; 
Morris  R.  Poucher,  20;  W.  P.  Pickhardt,  20;  Ernst 
Halbach,  20,  and  Hugo  Hill,  20. 


Additional  Clauses  in  Another  Contract 

Perhaps  an  even  more  complete  control  in  some 
ways  is  shown  in  the  following  contract  made  be- 
tween the  so-called  Farbwerke-Hoechst  Company 
and  Herman  A.  Metz.  Provisions  omitted  regard- 
ing the  sale  of  stock  are  along  the  lines  of  those 


92  GERMANY'S  NEW  WAR 

of  the  Kuttroff  contract.  In  addition  are  the  fol- 
lowing, summarized  because  of  the  great  length 
of  the  original  contract: 

The  name  of  Farbwerke  is  not  to  appear  on 
the  books  of  these  corporations  nor  be  known  to 
any  but  the  parties  to  the  agreement,  and  the 
transfer  of  shares  to  be  made  by  indorsement 
and  delivery  of  the  certificates  thereof.  On  de- 
mand, however,  the  Farbwerke  will  at  any  time 
be  entered  on  the  books  of  the  respective  cor- 
porations. 

Should  Metz  die  or  withdraw  from  active 
management  of  said  three  corporations  all  of  his 
shares  in  all  three  companies  must  be  tendered 
to  Farbwerke  at  prices  fixed  in  agreement,  who 
will  have  the  right  to  preemption.  The  option 
is  to  purchase  shares  of  all  three  corporations 
and  not  of  one  or  two  such  corporations. 

Metz  agrees  to  continue  in  active  control  and 
management  of  these  three  companies  unless 
Farbwerke  should  acquire  control  of  all  stock 
of  such  corporations,  and  in  turn  Farbwerke 
agrees  to  give  the  exclusive  sale  of  their  products 
to  H.  A.  Metz  &  Co.  at  their  lowest  market  price. 
This  agreement  for  five  years  and  to  go  on  un- 
less a  written  notice  of  the  intention  to  let  the 
same  expire  is  given  by  either  party  a  year  in 
advance. 

Metz  agrees  not  to  enter  into  a  competing  busi- 
ness nor  permit  the  use  of  his  name  in  such 
business  as  long  as  either  he  or  Farbwerke  re- 


DYES  AND  CHEMICALS  93 

mains  stockholders  in  the  three  corporations  or 
he  is  manager  and  so  long  as  Farbwerke  faith- 
fully observes  his  agreement.  In  turn  Metz 
promises  not  to  sell  any  of  his  stock  without 
giving  an  option  on  it  at  prices  given  in  Para- 
graph 13  to  Farbwerke,  and  for  three  years  there- 
after not  to  go  into  a  competing  business  nor 
lend  his  name  to  one. 

Agrees  Not  to  Sell  Competing  Products 
A  later  agreement  provides: 

H.  A.  Metz  &  Co.  or  the  Hoechst  Color  Co. 
is  not  to  buy  or  sell  products  competing  without 
reporting  such  to  Farbwerke  for  approval  or  dis- 
approval. Of  such  products  the  American  com- 
pany is  to  send  a  report  every  three  months  and 
samples  if  desired  and  statement  of  stock-in  trade 
on  hand  when  desired,  and  also  a  weekly  report, 
when  requested,  as  to  goods  and  wares  delivered 
with  the  prices.  When  name  is  changed  goods 
are  to  be  marked  Hoechst  Color  Co. 

An  agreement  on  July  22,   1912,   includes  the 
following : 

The  dividends  of  H.  A.  Metz  &  Co.  shall  be 
paid  to  the  holders  of  record  of  its  stock,  but  in 
division  between  Metz  and  Farbwerke  the  entire 
sum  of  dividends  to  stockholders  out  of  the 
profits  of  the  general  business  shall  be  regarded 


94,  GERMANY'S  NEW  WAR 

as  one  amount  and  the  entire  sum  paid  out  of  the 
profits  of  the  pharmaceutical  business  as  another 
amount  and  these  amounts  to  be  used  as  bases  for 
calculating  the  above  50  per  cent  or  25  per  cent, 
as  the  case  may  be.  Metz  not  to  have  a  separate 
claim  to  dividends  for  his  ten  shares.  All  profits 
and  dividends  not  paid  to  Metz  as  aforesaid  to 
be  the  property  of  the  German  corporation,  sub- 
ject to  the  bonuses  payable  as  aforesaid  to  em- 
ployes, if  the  German  corporation  elects  to  under- 
take such  distribution. 

As  long  as  Paragraph  1 1  remains  in  force  Metz 
agrees  not  to  purchase  or  sell  competing  products 
without  referring  such  transactions  to  Farbwerke 
for  approval  or  disapproval,  also  to  send  a  re- 
port every  three  months  to  Farbwerke  and  sam- 
ples if  desired,  and  render  to  them  when  re- 
quested a  statement  of  the  stock  in  trade  on  hand 
and  statements  of  all  goods  and  wares  delivered. 

So  strong  was  the  German  control!  Metz,  who 
is  an  American,  had  been  trying  for  years  to  free 
himself  from  this  control,  Mr.  Garvan  declares,  but 
without  success. 

For  the  rest,  the  German  trade  methods  were  in 
most  cases  all  that  is  despicable  and  much  that  is 
illegal. 

Bribery  Common;  Espionage  Rampant 

Bribery  was  a  usual  thing.  Espionage  was  ram- 
pant and  the  country  was  filled  with  "expert 


DYES  AND  CHEMICALS  95 

chemists,"  who  constantly  betrayed  to  the  Germans 
the  interests  of  their  employers.  Of  course,  they 
resorted  to  "full  line  forcing,"  a  practice  common 
in  this  country  but  much  condemned.  The  most 
used  scheme  was  the  corruption  of  the  boss  dyers, 
mostly  Germans,  who  by  manipulation  could  make 
the  best  dyes  result  poorly,  and  would  get  good 
effects  only  from  the  product  of  the  man  who  paid 
them.  There  are  charges  that  in  some  cases  these 
boss  dyers  took  pains  to  do  poor  work  on  goods 
that  were  to  meet  German  competition  in  the 
market. 

Dumping  was  the  accepted  way  of  killing 
American  competition,  wherever  it  showed  its  head, 
and  it  was  almost  completely  successful.  This  was 
done  mostly  in  branches  other  than  dyes,  because 
the  dye  industry  never  needed  the  German  killers' 
expert  attention.  When  the  Benzol  Products  Com- 
pany was  organized  in  1910  the  Germans  cut  the 
price  on  aniline  oil,  which  it  manufactured,  from 
ny2  cents,  normal,  under  8*/£.  When  there  was 
competition  in  salicylic  acid  they  sold  it  here,  after 
paying  a  duty  of  5  cents  a  pound,  for  25  cents,  the 
home  price  at  that  time  being  26>4  to  30^  cents. 
In  1910  they  sold  oxalic  acid  at  6  cents.  An  Ameri- 
can factory  opened  and  the  price  was  cut  to  4.7 


96  GERMANY'S  NEW  WAR 

cents.  In  1907  the  American  factory  shut  down 
and  the  price  went  to  9  cents;  it  reopened  after 
some  months  and  4.7  cents  again  became  the  figure. 
In  1908  the  American  failed  and  the  price  went 
to  7J^  and  stayed  there. 

Of  course  there  was  tax  dodging.  In  the  Bayer 
Company,  for  instance,  Mr.  Palmer  reports  the 
organization  of  a  subsidiary  company  "to  conceal 
the  profits  for  the  purposes  of  taxation,"  and  he 
adds  "the  investigation  also  uncovered  a  number  of 
less  legitimate  evasions  of  the  tax  laws  and  re- 
sulted in  the  recovery  of  a  large  sum  by  the 
Treasury";  and  at  least  a  part  of  the  concealed 
ownerships  of  the  German  agencies,  which  helped 
make  it  hard  for  the  Alien  Property  Custodian  to 
seize  them  after  we  entered  the  war,  were  unearthed 
at  this  time.  Elaborate  arrangements  also  were 
taken  to  avoid  the  law  against  selling  pools,  and 
these  seem  to  have  worked. 

Big  Propaganda  Against  Americans 

Backing  all  this  was  an  elaborate  propaganda. 
It  has  not  been  determined  how  far  this  was  under 
central  German  control,  but  it  carries  all  the  ear- 
marks that  distinguish  the  propaganda  we  have 


DYES  AND  CHEMICALS  97 

learned  to  know.  It  became  very  complicated  at 
times,  and  some  of  it  was  so  convincing  that  the 
myth  of  invincibility,  as  Mr.  Palmer  calls  it,  still 
lingers  in  many  minds. 

The  Germans,  from  their  high  places  as  the 
chemical  experts  for  the  world,  announced  that 
American  coal  would  not  produce  a  tar  suitable  for 
dyes.  They  declared  that  Americans  had  neither 
the  brains,  the  training  nor  the  skill  to  produce 
them,  and  we  Americans  meekly  swallowed  the  in- 
sult. They  laid  it  down  as  an  axiom  that  no  one 
could  compete  with  them  in  the  niceties  of  chemical 
research — and  we  took  that,  too.  Finally,  they 
pointed  out  that  the  German  industry  had  such  a 
start  that  we  never  could  overtake  it;  and,  but  for 
the  war,  there  may  have  been  some  truth  in  that. 

But  to-day  we  have  found  that  we  have  the 
brains,  the  skill,  the  patience,  the  inventiveness  and 
very  usable  coal,  and  with  a  little  more  time  we 
shall  have  overtaken  the  German  industry,  and, 
many  believe,  have  put  it  far  in  the  rear.  The  in- 
vention of  coal  tar  dyes  is  not  German,  anyway. 


98  GERMANY'S  NEW  WAR 

Industry  Here  Deep  in  Hun  Plots 

When  the  war  began  and  after  we  entered  it 
the  German  chemical  industry  here  remained  as 
pro-German  as  ever.  Its  first  lookout  was  to  save 
its  own  markets  from  the  British,  French  and 
American  competition  that  soon  sprang  up.  To 
this  end  it  went  to  every  length  except  the  manu- 
facture of  the  more  valuable  secret  dyes.  This  was 
started,  but  absolutely  forbidden  by  the  home  com- 
panies. Herzog,  it  will  be  remembered,  emphasizes 
in  his  book  the  principle  that  in  no  circum- 
stances shall  valuable  trade  secrets  concerning  the 
industries  which  Germany  intends  to  use  to  blud- 
geon the  world  be  permitted  to  leave  Germany. 

With  what  supplies  were  on  hand  the  German 
concerns  mixed  cheaper  or  more  available  substi- 
tutes to  string  them  out.  Those  that  could  be  ob- 
tained they  bought  at  almost  any  price  and  sent 
them  out  as  their  own  under  trademarks  and  labels 
that  closely  imitated  the  German  and  with  legends 
that  emphasized  the  German  origin  of  the  goods. 
They  sought  longtime  contracts  as  the  price  of  part- 
ing with  what  they  had  of  the  more  precious  ma- 
terials. Finally  they  organized  an  American  edition 
of  the  great  German  dye  cartel,  the  Republic  Trad- 


DYES  AND  CHEMICALS  09 

ing  Corporation,  which  included  all  the  principal 
agents  and  which  was  intended  to  guard  their  mu- 
tual interests  and  fight  American  competition.  As 
is  stated  in  a  letter  from  the  Bayer  company  to 
Dr.  Christian  Hess,  one  of  the  German  owners: 

It  was  interesting  to  note  in  our  last  conversa- 
tion with  Mr.  Metz  that  he  was  specially  anxious 
that  the  organization  should  aim  later  at  placing 
in  the  pillory  all  dealers  who  would  not  publicly 
agree  to  run  the  business  according  to  the  fixed 
principles  of  sale  laid  down  by  us.  You  will 
understand  what  I  mean,  and  I  think  Mr.  Kut- 
troff  also  will  enlist  under  the  flag  later. 

This  precious  corporation  languished  for  lack  of 
having  any  dyes  to  sell,  though  it  got  a  little  when 
the  Deutschland  came  over,  and  was  doing  little 
when  it  came  under  the  control  of  the  Alien  Prop- 
erty Custodian,  through  his  seizure  of  most  of  the 
member  companies. 


Many  Schemes  to  Avoid  Seizure 

When  the  United  States  entered  the  war  and  it  be- 
came evident  that  German  property  was  to  be  seized 
Teutonic  evasion  reached  its  highest  point.  Every 
conceivable  scheme  was  resorted  to  in  the  efforts 


100  GERMANY'S  NEW  WAR 

to  conceal  the  actual  German  ownership,  and  some 
of  these  schemes  were  so  smooth  that  the  courts 
still  are  untangling  the  messes,  with  a  fair  chance 
that  the  government  may  get  a  lien  on  the  com- 
panies, but  will  not  get  control  of  them.  Less  than 
half  of  the  German  owned  companies  found  them- 
selves in  a  position  where  they  thought  it  safer  to 
make  reports  to  the  Alien  Property  Custodian.  The 
schemes  of  evasion  were  all  different  and  each  was 
a  pretty  puzzle  in  itself. 

One  of  the  first  unravelled,  and  the  simplest,  was 
that  of  the  Bayer  Company.  This  company,  which 
was  exceedingly  profitable,  reported  that  its  stock 
was  held  by  one  of  its  officers,  on  behalf  of  Ger- 
mans who  held  for  the  parent  company.  It  also 
reported  the  stock,  similarly  held,  of  the  Synthetic 
Patents  Company,  which  owned  the  patents  and 
other  rights  under  which  Bayer  operated,  was  used 
as  a  milker  to  conceal  profits. 

The  readiness  with  which  such  an  important  con- 
cern surrendered  aroused  suspicion,  and  after  a 
prolonged  investigation  the  joker  was  unearthed. 
This  was  the  Williams  &  Crowell  Company,  a  con- 
cern in  Connecticut,  to  which  had  quietly  been 
transferred  many  of  the  most  valuable  rights  of  the 
Bayer.  It  finally  was  possible  to  prove  that,  though 


DYES  AND  CHEMICALS  101 

the  stock  of  this  concern  ;was  held  l\y.  American 
citizens,  the  money  to  pay  for  it  came  from,  Ger- 
mans. 

Contract  Revealed  Control  by  Germans 

The  ownership  of  the  branch  of  the  Badische 
Company,  Kuttroff,  Pickhardt  &  Co.,  was  perhaps 
the  most  carefully  concealed.  This  stock  ap- 
parently was  held  by  the  officers  of  the  concern, 
and  it  was  not  till  the  contract  printed  above  was 
unearthed  that  it  was  plain  they  had  no  real  con- 
trol. In  fact,  the  New  York  concern  asked  permis- 
sion of  the  Badische  for  every  raise  of  salary  to 
an  employe,  and  paid  it  sums  running  into  hundreds 
of  thousands  for  which  no  reason  appeared. 

A  trick  that  failed  was  that  of  the  Bauer 
Chemical  Company,  a  much  smaller  concern,  which 
owned  the  rights  to  Formamint  and  Sanatogen.  This 
concern,  by  the  way,  raised  a  pretty  problem  for 
the  Alien  Property  Custodian  when  he  seized  it. 
It  became  his  duty  to  protect  the  interests  of  the 
property,  and  one  of  the  interests  lay  in  the  sale 
of  Sanatogen.  Mr.  Garvan,  who  was  in  charge, 
remembered  The  New  York  Tribune's  exposure  of 
the  fake  involved  in  this  scheme  of  selling  a  few 


102  GERMANY'S  NEW  WAR 

cents'  wbrth  of  stufi— chiefly  cheese — for  a  dollar, 
and  refused  to  continue  the  advertising. 

The  stock  of  this  concern  appeared  to  have  passed 
into  the  hands  of  T.  Ellett  Hodgkin,  its  lawyer, 
who  now  is  under  indictment  on  another  matter, 
also  connected  with  German  interests  in  this  coun- 
try. Hodgkin  bought  744  of  the  750  shares  in 
May,  1916,  borrowing  the  money  for  the  deal 
from  Richard  Kny,  father-in-law  of  George  Simon, 
vice-president  of  the  corporation,  who  held  the 
stock  himself,  in  escrow  for  the  debt,  leaving  Mr. 
Hodgkin's  ownership  rather  thin.  Mr.  Kny  ap- 
pears in  another  place  on  the  records  of  the  Alien 
Property  Office,  in  connection  with  the  Kny- 
Scheerer  Corporation,  which  held  the  monopoly  of 
German  surgical  instruments  in  this  country. 

Wanted  Ownership  "To  End  of  the  War" 

In  addition,  there  was  taken  from  a  man  who 
reached  Montreal  from  Germany  an  authorization 
sent  in  response  to  a  letter  in  which  Hodgkin  said : 

Get  authority  to  Hohmeyer  [a  German  subject 
in  control  of  the  company  for  the  owners]  to  de- 
liver to  me  or  to  you  all  the  stock  certificates 
of  the  company,  for  us,  or  me  or  you,  to  own 


DYES  AND  CHEMICALS  103 

absolutely  until  we  sell  them,  or  otherwise  until 
the  end  of  the  war.  The  company  and  name  are 
so  well  known  that  I  would  like  it  to  be  American 
in  name  and  in  fact,  so  that  in  case  I  am  ever 
called  upon  to  show  my  hand  I  can  safely  do  so. 
...  I  am  sure  you  will  understand  what  I  am 
after. 

The  Alien  Property  Custodian  has  since  sold  out 
this  concern. 

Although  the  American  chemical  industry  took 
a  fair  start  about  1880,  the  Germans  promptly 
crushed  it,  and  when  war  broke  there  were  but 
five  plants  manufacturing  dyes  in  this  country,  three 
of  them  German  owned,  and  the  other  two  prac- 
tically merely  assembling  German  products.  With 
the  war  there  came  an  immediate  tremendous  ex- 
pansion and  many  companies  were  formed.  At 
first  the  Germans  paid  little  attention  to  this,  a  letter 
from  the  Cassella  Company  of  New  York  stating: 
"There  is  no  grave  danger  to  be  feared  for  German 
industry,"  and  expressing  the  belief  that  the  textile 
industry  would  prevent  the  dye  makers  from  get- 
ting enough  protection  to  let  them  continue  after 
the  war. 


104  GERMANY'S  NEW  WAR 


First  American  Dyes  Like  a  Bride's  Biscuits 

At  the  start  the  American  industry  was  prac- 
tically without  resources.  Something  of  the  situa- 
tion they  had  to  meet  is  shown  by  a  few  figures. 
There  were  more  than  ten  thousand  dyes  patented 
in  Germany,  of  which  some  900  had  an  extensive 
sale  in  America.  There  were  more  than  5,000 
patents  in  America  on  German  dye  manufacture. 
Of  course  all  these  patents  very  shortly  were  put 
at  the  disposal  of  the  American  manufacturers,  but 
producing  the  dyes  was  a  very  different  matter. 

Some  of  the  American  makers  did,  and  there 
were  many  justifiable  complaints  of  the  dyes  pro- 
duced— of  which  the  German  propagandists  took 
full  advantage. 

But  to-day  the  American  industry  is  nearly  out 
of  the  woods.  It  is  actually  making  some  dyes 
better  and  cheaper  than  Germany  ever  did.  It  has 
produced  practically  all  the  staple  colors.  And 
within  a  few  weeks  the  great  Du  Pont  labora- 
tories have  begun  turning  out  "vat"  dyes,  the 
last  and  most  complicated  of  the  lot.  Also,  America 
now  has  a  small  army  of  splendid  chemists  at  work 
inventing  new  dyes  of  her  own.  This  process,  how- 


DYES  AND  CHEMICALS  105 

ever,  has  always  so  far  taken  about  four  years  to 
come  to  a  head. 


Germans  Get  Inside  American  Development 

The  Germans  did  not  long  keep  out  of  the 
American  development,  and  there  are  now  promi- 
nent in  it  several  men  who  have  been  German  agents. 
The  Alien  Property  Custodian  has  seized  and  sold 
most  of  the  big  German  companies  here,  but  their 
brains  remain,  and  in  some  cases  the  evasion  has 
been  such  that  he  could  not  get  the  concern. 

Several  small  companies  are  also  imperfectly 
cleaned  out,  and  there  are  a  few  the  stock  of  which 
is  apparently  in  the  hands  of  neutrals,  but  which 
are  decidedly  under  suspicion.  Altogether  the 
chemical  trade  was  in  a  far  from  satisfactory  con- 
dition. Mr.  Palmer  in  his  report  could  say  of  it 
nothing  better  than  this: 

This,  it  is  to  be  hoped,  may  interpose  some 
difficulties  in  the  way  of  any  attempt  on  the  part 
of  the  latter  to  reestablish  themselves  in  this 
country. 


106  GERMANY'S  NEW  WAR 


Patent  Trust  Plan  Gives  Protection 

The  whole  situation,  however,  has  been  changed 
as  the  result  of  a  scheme  recently  put  into  effect  by 
Francis  P.  Garvan,  the  new  Alien  Property  Custo- 
dian, and  devised  by  him  when  chief  of  the  Bureau 
of  Investigation. 

This  scheme  hangs  on  patents.  It  was  discovered 
that  the  Germans  had  registered  in  this  country 
some  5,000  patents.  There  was  practically  no 
manufacture  here  under  them,  and  it  soon  became 
evident  that  their  chief  purpose  was  to  prevent  the 
importation  of  dyes  made  under  them,  such  im- 
portation being  an  infringement  of  the  patent.  Mr. 
Garvan  saw  no  reason  why  this  should  not  work 
both  ways — why  the  patents  seized  and  sold  to 
American  owners  should  not  be  used  as  a  bar  to 
the  import  of  German  dyes. 

He  therefore  organized  the  Chemical  Foundation, 
Inc.,  which  is  to  hold  in  trust  all  such  patents  and 
others  that  may  be  developed,  and  to  which  prac- 
tically all  of  the  German  patents  have  already  been 
turned  over.  The  Foundation  will  conduct  experi- 
ments as  well  as  protect  the  patents,  and  all  its 
patents  will  be  open  to  the  use  of  any  American 


DYES  AND  CHEMICALS  107 

manufacturer,  but  not  to  others,  and  will  bar  im- 
portation of  anything  infringing. 

This  scheme,  he  believes,  will,  when  supplemented 
with  a  plan  for  licensing  the  importation  of  Ger- 
man dyes  in  such  quantities  as  may  be  necessary, 
and  no  more,  at  reasonable  prices,  offer  almost 
complete  protection  to  the  American  industry  till 
the  period  when  the  patents  now  held  are  super- 
seded by  new  ones.  By  that  time,  he  hopes,  the 
American  industry  will  be  able  to  take  care  of  itself. 

Octopus  Prepares  for  New  Attempt 

Meanwhile,  the  German  octopus  has  gathered 
strength  for  a  new  assault  on  America,  and  is  plan- 
ning to  crush  out  the  new  industry  instantly.  It 
is  estimated  that  a  hundred  million  dollars'  worth 
of  dyes — four  times  the  normal  annual  consump- 
tion of  America — have  been  gathered  ready  to 
"dump"  through  Copenhagen  the  moment  the 
blockade  lifts.  The  prices  at  which  these  dyes  will 
appear  may  be  judged  from  the  fact  that  already 
"neutral"  agents  are  selling  dyes  in  Italy  at  half 
the  market  price.  In  addition,  there  has  been  a 
tremendous  development  of  Swiss  dyeworks,  under 
the  Herzog  rule  that  German  goods  must  appear 


108  GERMANY'S  NEW  WAR 

in  neutral  dress.  In  1913,  the  last  year  before  the 
war,  Switzerland  took  from  Germany  5,000,000 
pounds  of  "intermediates,"  the  bases  from  which 
dyes  are  manufactured.  In  1916,  the  last  year  for 
which  figures  are  available,  she  took  21,000,000 
pounds — more  than  four  times  as  much. 

The  flood  may  break,  as  the  war  broke,  with 
America  unready  to  meet  it.  No  protective  action 
has  been  taken  so  far  except  that  by  the  Alien  Prop- 
erty Office. 


CHAPTER  IX 
THE  GERMAN  METAL  OCTOPUS 

METALS  THE  LIFE  OF  GERMAN   INDUSTRY — DANGER 

OF  SHORTAGE  ONE  OF  CAUSES  OF  WAR WHOLE 

INDUSTRY  OF  WORLD  DOMINATED  EXCEPT  IN 
AMERICA,  AND  WEDGE  DRIVEN  IN  HERE — BIG 
FIGHT  MADE  TO  DESTROY  THE  INVADER — THE 
MENACE  THAT  REMAINS 

WHEN  the  great  war  began  Germany  controlled 
the  metal  situation — prices,  production  and  supply 
— of  all  the  world  except  America.  Into  the  United 
States  even  the  great  netal  octopus  had  thiown 
three  powerful  arms,  which  already  had  secured 
for  Germany  amazing  advantages  against  America 
even  on  American  soil  and  which  were  so  placed 
strategically  that  they  were  fast  tightening  their 
grip  on  the  whole  American  industry. 

The  war  gave  both  the  Allies  and  America  a 
chance  to  break  the  grip  of  this  octopus,  and  heavy 

109 


110  GERMANY'S  NEW  WAH 

blows  have  been  struck.  As  with  other  of  the  Hun 
invaders,  this  has  been  largely  smashed,  but  as  with 
others,  too,  there  are  powerful  pieces  left,  though 
in  America  itself  the  work  has  been  so  thorough 
that  A.  Mitchell  Palmer,  former  United  States 
Alien  Property  Custodian,  reports  it  practically 
complete. 

Germany,  however,  is  already  on  the  move  to 
regain,  and  more  than  regain,  her  old  control.  She 
starts  under  a  handicap.  But  nowhere  has  any  bar- 
rier against  her  been  erected  that  will  last  more 
than  a  few  years,  if  American  and  Allied  stock- 
holders succumb  to  the  tremendous  prices  she  can 
and  will  offer  for  a  new  hold  on  us. 

Metals  the  Life  of  Huns'  Industry 

Metals  are  the  lifeblood  of  Germany's  industrial 
progress,  and  of  her  hope  of  exploiting  and  domi- 
nating the  World.  Before  the  war  exports  of  metal 
manufactures  and  products  constituted  more  than 
a  quarter  of  all  her  exports — $615,175,000  worth 
in  1913.  She  has  built  her  army  of  invasion  around 
them,  with  the  belief  that  the  coming  age  will  be 
even  more  that  the  present  the  age  of  metals,  and 
that  he  who  can  control  the  world's  metals  will  be 


THE  METAL  OCTOPUS  111 

supreme.  A'nd  Germany,  in  trade  as  in  arms,  aims 
at  nothing  short  of  supremacy. 

Germany  herself,  however,  is  short  of  metals. 
Even  the  tremendous  loot  from  the  French  stores 
of  coal  and  iron  in  1870  have  proved  too  little, 
though  the  great  wealth  of  the  Rhine  industries 
was  built  on  them.  The  steel  barons  reported  to 
the  Imperial  Council  ten  years  ago  that  unless  Ger- 
many could  increase  her  stores  of  iron  she  would 
soon  lose  in  the  race.  And  about  the  same  time 
a  survey  of  her  mineral  wealth  showed  that  at  the 
probable  rate  of  consumption  practically  all  her 
stores  of  every  kind  would  be  gone  in  from  forty 
to  sixty  years. 

Facing  this  situation  she  saw  her  whole  vision 
of  world  dominion  tottering,  in  spite  of  the  tre- 
mendous strides  in  commerce  of  the  past  few  years. 
The  whole  course  of  the  war — Lens,  the  Saar  and 
Briey  basins,  Warsaw  and  Poland — all  prove  that 
their  stores  of  metals  were  the  loot  that  seemed 
largest  in  her  eyes,  and  in  speech,  writing  and  action 
the  whole  nation  gloated  over  the  wealth  they  would 
bring.  When  the  plunder  began  to  slip  through 
her  fingers  she  did  all  that  could  be  done  to  ruin 
the  mines  she  could  not  hold,  so  that  at  least  they 
would  not  count  against  her  in  her  coming  trade 


GERMANY'S  NEW  WAR 

campaign.     She  proved  here  again  that  her  objects 
in  the  war  were  commercial  and  industrial. 

Plans  to  Get  Other  Metals 

Even  these  mines,  however,  were  not  enough  to 
satisfy  her,  as  there  are  other  metals  she  would  still 
lack.  Herzog,  as  usual,  tells  her  plans  for  securing 
these,  including  other  natural  products  and  classify- 
ing them  in  general  "raw  materials."  These  are 
the  terms  he  would  have  Germany  impose  on  other 
countries : 


It  must  stipulate,  also,  an  unlimited  oppor- 
tunity to  acquire  the  sites  needed  for  winning 
raw  materials  and  an  unlimited  right  to  get  them 
out  by  German  enterprises.  It  must  preclude  any 
further  restriction  by  providing  that  these  enter- 
prises cannot  be  bound  to  sell  any  amounts  of 
these  raw  materials  in  the  countries  where  they 
have  been  gained,  nor  to  use  them  there  in  manu- 
facture or  in  any  other  way.  The  government 
of  the  country  in  question  can  be  permitted  to 
exercise  its  right  of  requisitioning  them  only 
with  the  consent  of  the  proper  German  officials. 
The  commercial  treaty  must  assure  an  oppor- 
tunity to  procure  unrestricted  quantities  of  raw 
materials  in  foreign  countries  and  to  export  them 
without  restriction  to  German  territory.  ...  It 
must  be  made  possible  for  the  German  govern- 


THE  METAL  OCTOPUS  113 

ment  to  interfere  without  foreign  countries  pro- 
testing that  their  sovereignty  is  being  violated. 

He  says  much  more  along  this  line. 

Metal  Octopus  Dominated  World 

It  was  to  get  these  other  metals — copper,  zinc, 
tin,  lead  and  so  on — that  the  metal  octopus  was 
formed.  It  has  not  even  yet  been  entirely  con- 
solidated, though  through  its  banking  connections 
and  government  supervision  it  has  achieved  perfect 
unity  of  action.  There  were  three  chief  metal  firms 
— the  Metallgesellschaft,  Beer,  Sondheimer  &  Co. 
and  L.  Vogelstein  &  Co.  Involved  with  them  were 
the  Metalbank  and  the  Deutsches  Gold  and  Silber 
Anstalt. 

1%>§  This  octopus  reached  into  every  country  of  the 
world,  and  only  in  America  had  there  remained 
any  independence.  A  chart  prepared  by  the  United 
States  Alien  Property  Custodian  shows  the  rami- 
fications of  the  great  system;  there  are  102  com- 
panies in  it.  In  practically  every  one  the  control 
was  German  .(often  through  Germans  naturalized 
in  the  invaded  country,  as  was  the  case  with  the 
Mertons  in  England,  who  were  originally  named 
Moses  and  came  from  Frankfort).  Also,  in  nearly 


114  GERMANY'S  NEW  WAR 

every  case  the  Germans  were  making  use  of  the 
capital,  brains  and,  of  course,  the  natural  resources 
of  the  invaded  country  for  the  benefit  of  German 
trade,  German  profits,  the  employment  of  German 
immigrants  and  German  preparation  for  war 
against  the  very  nations  that  were  granting  this 
hospitality. 

The  chart  is  not  complete.  Here  is  Mr.  Palmer's 
official  description  of  the  octopus : 

We  find  in  their  control  not  only  German  metal 
and  chemical  companies  (those  making  chemicals 
used  in  mining),  but  also  French,  Belgian,  Eng- 
lish, Australian,  American,  Swiss,  Spanish, 
Austrian,  Italian  and  Mexican.  In  addition,  they 
control  syndicates  for  the  exploration  of  mines 
in  South  America,  Hungary,  Russia  and  on  the 
African  continent.  In  this  vast  combine  we  find 
charted  245  separate  companies,  whose  interests 
lie  in  almost  every  part  of  the  globe  and  who 
produce  every  known  form  of  mineral. 

Furnished  Sinews  for  German  War 

These  companies  had  furnished  the  material 
sinews  of  Germany's  war  machine.  Herzog's  bit- 
terest complaint  is  that  the  war  stepped  ahead  of 
the  commercial  control  Germany  had  already  won 
and  crippled  her. 


THE  METAL  OCTOPUS  115 

Zinc  was  completely  in  their  hands,  except  in 
America.  The  case  of  Australia  illustrates  her 
methods.  There,  through  some  blunder  of  English 
business,  Germany  had  been  able  to  take  full  con- 
trol of  the  buying  of  all  Australian  ores  produced. 
She  distributed  them  to  what  smelters  she  chose. 
She  fixed  the  buying  and  the  selling  price.  Aus- 
tralia worked  for  her  and  at  her  own  terms.  From 
this  the  Germans  soon  worked  to  complete  control 
of  world  buying  of  zinc,  and  from  this  again  to 
control  of  the  smelters.  They  forced  in  the 
smelters  of  other  countries,  and  in  1911  formed 
a  syndicate  which  actually  controlled  production, 
price  and  distribution. 

In  lead  the  control  was  as  great. 

In  copper  the  Germans  never  had  gained  com- 
plete control,  because  60  per  cent  of  the  world's 
supply  comes  from  the  United  States,  and  here 
other  powerful  interests  were  ahead  of  them.  But 
through  the  metal  triumvirate  and  because  of  the 
great  buying  power  of  Germany,  amounting  to  25 
per  cent  of  the  world  consumption,  she  was  able 
to  exercise  a  powerful  control  over  prices.  She 
took  advantage  of  the  American  attitude  that  there 
should  be  no  speculation  in  copper  prices,  and  she 
speculated  with  great  profit. 


116  GERMANY'S  NEW  WAR 

Four  Invaders  Fastened  on  Us 

Four  firms  in  the  United  States,  Mr.  Palmer 
found,  came  as  parts  of  the  German  invasion — 
the  American  Metal  Company,  representative  of 
and  owned  by  the  Metallgesellschaft;  Beer,  Sond- 
heimer  &  Co.  and  L.  Vogelstein  &  Co.,  representa- 
tives of  Beer,  Sondheimer  &  Co.,  and  of  Aaron 
Hirsch  &  Sohn  in  Germany,  and  Roessler,  Has- 
lacher  &  Co.,  a  chemical  firm,  but  controlled  by 
the  Gold  und  Silber  Scheide  Anstalt. 

The  first  of  these  was  the  greatest,  and  ranked 
next  to  the  powerful  Guggenheim  interests  in 
America.  It  had  connections  with  a  total  of  thirty- 
seven  concerns  in  the  United  States  and  Mexico,  of 
which  eighteen  were  owned  or  controlled  and 
operated  by  it;  six  were  partly  owned  and  in  close 
relations;  nine  in  which  stocks  or  bonds  were 
owned,  and  four  which  had  ceased  to  operate.  It 
not  only  produced,  it  acted  as  both  broker  and 
speculator  in  metals,  especially  copper,  of  which  it 
bought  141,398,982  pounds  during  1918.  In  two 
years  ended  June  30,  1917,  it  produced  1,700,- 
000,000  pounds  of  spelter  and  bought  585,000,000 
pounds  more.  It  dealt  in  lead,  arsenic,  sulphuric 
acid,  coal,  silver,  zinc  oxides  and  dust,  antimony 


THE  METAL  OCTOPUS  117 

and  molybdenum.  Its  annual  business  has  run 
above  $150,000,000  a  year  and  its  profits  above 
$7,000,000.  This  is  for  the  American  Metal  Com- 
pany alone — the  total,  including  its  subsidiaries,  has 
not  even  been  estimated. 

L.  Vogelstein  &  Co.  was  far  less  powerful.  Its 
business  was  purely  that  of  trading,  not  of  produc- 
ing, except  in  one  or  two  very  minor  cases.  But 
something  of  its  influence  can  be  seen  from  the 
fact  that  in  five  years  it  had  handled  870,931,737 
pounds  of  copper,  578,138,191  ounces  of  gold,  25,- 
120,134  ounces  of  silver,  323,099,014  pounds  of 
lead,  397,740,356  pounds  of  spelter  and  91,128,623 
pounds  of  tin.  The  total  business  was  $342,538,- 
188.70,  an  annual  turnover  of  more  than  $68,- 
000,000. 

The  Beer,  Sondheimer  business  was  smaller  yet. 
Most  of  this  was  in  the  zinc  trade,  though  it  also 
figured  heavily  in  copper  and  lead.  Its  total  busi- 
ness in  the  last  four  years  amounted  to  $18,- 
052,958. 

Thus  the  German  octopus,  through  the  last  five 
years,  has  been  handling  about  $220,000,000  an- 
nually of  American  metal  business. 


118  GERMANY'S  NEW  WAR 

Price  of  American  Coppex.  Manipulated 

A  single  fact,  far  more  than  columns  of  figures, 
shows  the  power  of  the  German  metal  octopus  in 
America,  and  how  it  worked.  Though  copper  was 
not  under  Germany's  control,  though  its  mining  was 
almost  entirely  in  American  hands,  though  the  Ger- 
man purchases  were  only  about  a  quarter  of-  world 
consumption — Germans  were  able  to  get  their  cop- 
per, year  after  year,  at  about  a  cent  a  pound  less 
than  Americans  could — from  ten  to  five  per  cent 
advantage  in  price.  That  advantage  hurt  America, 
and  helped  the  German  campaign  of  world  exploita- 
tion, in  every  single  thing  into  which  copper  enters. 

A!.  Mitchell  Palmer,  in  his  report  on  the  work 
of  the  Alien  Property  office,  thus  sums  up  the 
menace : 

Who  will  say  that  these  were  not  a  standing 
menace  to  the  security  of  our  domestic  metal 
industry,  as  well  as  to  the  development  of  our 
own  commercial  interests  in  Mexico  and  South 
America?  It  is  no  answer  to  the  obvious  po- 
tential power  for  evil  which  these  companies 
possessed  to  point  to  the  fact  that  since  the  Euro- 
pean war  the  American  Metal  Company  has  been 
entirely  officered  by  Americans  who  have  shaped 
the  policy  of  that  powerful  organization  or  to 


THE  METAL  OCTOPUS  119 

show  that  Vogelstein  is  a  naturalized  American 
citizen,  or  to  remind  us  that  Elkan  and  Frohn- 
knecht,  in  control  of  Beer,  Sondheimer  &  Co., 
are  likewise  American  citizens — they  were  late 
converts  to  citizenship.  The  power  lay  in  the 
hands  of  Hirseh  &  Sohn  and  Beer,  Sondheimer 
&  Co.  and  the  Metallgesellschaft  and  its  stepchild, 
Henry  R.  Merton  &  Co.  at  any  and  all  times  to 
direct  the  policy  of  these  American  concerns. 

These  outposts  of  German  commercial  aggres- 
sion having  gained  a  foothold  in  the  United 
States,  were  gradually  spreading  into  Mexico  and 
South  America,  which  are  legitimate  fields  for 
our  own  commercial  development.  In  Mexico 
to-day  the  American  Metal  Company  is  second 
only  to  the  American  Smelting  and  Refining 
Company  (Guggenheim)  in  its  control  of  the 
mineral  wealth  of  that  country.  In  Peru  and 
Chile  and  other  parts  of  South  America  these 
companies  not  only  control  the  output  of  mines 
and  ^smelters,  but  the  American  Metal  Company 
also 'owns  mining  claims  of  great  extent. 

With  unlimited  resources  at  their  command, 
they  bought  up  mines,  financed  and  built  smelters 
and  refineries,  bought  and  sold  huge  quantities 
of  metals,  organized  and  controlled  their  own 
systems  of  transportation  and  even  invaded  the 
oil  industry.  With  the  controlling  power  of 
these  great  organizations  centered  in  the  hands 
of  Germans — knowing  what  we  know  about  Ger- 
many and  Germans — who  will  deny  that 
have  been  a  menace  to  this  country? 


120  GERMANY'S  NEW  WAR 

German  Outposts   Skilfully  Placed 

The  skillful  strategy  and  location  of  many  of 
the  German  outposts  here  made  the  menace  far 
greater  than  the  bare  figures  of  comparative  capital 
and  turnover  show,  as  is  proved  by  the  manipula- 
tion of  the  price  of  copper. 

One  example  of  this  is  the  Roessler-Hasslacher 
company,  not  a  member  of  the  triumvirate,  but 
working  hand  and  glove  with  it  through  the  home 
control.  This  firm  was  primarily  a  chemical  com- 
pany, and  its  power  lay  in  the  fact  that  through 
patents  and  other  advantages  it  had  a  complete 
monopoly  in  America  of  the  manufacture  of 
cyanide,  which  is  indispensable  to  the  reduction  of 
gold  and  silver  ores.  That  is,  it  was  in  a  position 
from  which  it  could  at  any  time  throw  a  great 
advantage  to  German  controlled  companies,  or  even 
force  American  concerns  out  of  business  by  favorit- 
ism in  the  price  of  the  votal  cyanide,  or  by  such 
delays  in  delivery  or  refusal  to  sell  as  would  make 
production  imoossible  by  the  concerns  singled  out 
for  attack. 

This  concern  was  entirely  German  controlled  up 
to  the  war,  and  many  charges  of  activity  hostile 
to  American  interests  have  been  laid  against  it.  Its 


THE  METAL  OCTOPUS  121 

officials  were  admittedly  pro-German,  and  shortly 
before  America  came  into  the  war  they  sent  as 
their  agent  for  certain  negotiations  in  Germany 
Oscar  Rolland  Seitz,  who  was  active  in  many  pro- 
German  movements  and  was  formerly  editor  of 
Hearst's  "Morgen  Journal."  Five  of  its  officers 
drew  salaries  of  $70,000  a  year  each,  and  one  of 
them  admitted  to  the  Alien  Property  Custodian  that 
this  was  a  scheme  for  transferring  profits  to  Ger- 
many secretly. 

Big  Power  Lay  in  Patents'  Control 

Another  similar  strategic  advantage  lay  in  the 
control  by  Beer,  Sondheimer  &  Co.  of  the  patents 
for  "minerals'  separation,"  the  process  by  which 
the  metals  are  removed  from  the  worthless  material 
in  which  they  are  found  in  the  ore.  These  patents 
were  taken  out  as  late  as  1914,  and  a  syndicate 
was  formed  for  their  exploitation  which  was  ex- 
tremely profitable,  because  of  the  great  saving  they 
permitted  as  against  the  old  processes.  Beer,  Sond- 
heimer &  Co.  became  exclusive  agents  for  these  in 
the  United  States,  as  well  as  having  a  heavy  in- 
terest in  the  syndicate.  Thus  there  was  another 
noose  around  the  neck  of  American  business, 


GERMANY'S  NEW  WAR 

^  third  strategic  move  is  seen  in  the  heavy  in- 
vestments in  Mexico.  There  are  two  advantages 
to  be  gained  there.  The  first  is  that  all  Mexican 
property  is  cheap  at  present,  and  by  going  in  under 
American  names  the  German  capital  will  have  the 
chance  to  realize  heavily  when  the  time  comes  for 
the  United  States  to  adjust  its  claims  in  Mexico, 
while  if  this  government  does  not  do  this,  the  in- 
terests could  be  retransferred  to  Germans  and  the 
German  power  invoked. 

The  second  advantage,  of  course,  is  the  conceal- 
ing of  the  German  wealth,  to  keep  it  out  of  reach 
of  the  Allies  when  the  demand  for  indemnities  is 
presented.  Thus  Germany  on  this  continent  is  pur- 
suing the  same  course  in  chaotic  Mexico  that  she 
is  following  in  Bolshevik  Russia — buying  cheaply 
to  get  a  secure  foothold  on  the  country  for  future 
exploitation,  and  counting  on  the  use  of  force  to 
make  the  speculation  good. 


Hun  Government  Kept  Close  Touch 

The  close  touch  which  the  German  government 
kept  on  these  concerns  is  illustrated  in  the  case  of 
Vogelstein,  the  company  being  for  some  time  in 


THE  METAL  OCTOPUS  123 

financial  troubles  in  the  early  years  of  the  war. 
Hugo  Schmidt,  the  German  commercial  agent  in 
America,  promptly  took  hold  and  threw  the  power 
of  the  Deutsche  Bank  behind  the  concern.  He  sup- 
plied credit,  arranged  for  shipments  and  finally 
helped  to  get  the  assets  concealed  when  war  with 
America  became  unavoidable. 

The  American  Metal  Company  figures  in  another 
way.  When  the  lack  of  German  potash  drove 
America  to  the  development  of  her  own  resources, 
it  became  very  much  to  Germany's  interest  to  make 
sure  that  the  American  developments  could  be 
crushed  when  the  time  came.  Von  Bernstorff,  ac- 
cordingly, started  a  scheme  to  have  the  American 
Metal  Company  made  the  selling  agent,  "in  Ger- 
many and  America,"  for  the  American  potash.  He 
reported  to  his  government  as  late  as  February  6, 
1917,  just  a  few  days  before  relations  were  broken 
off,  that  the  prospects  of  this  were  good,  after  the 
war.  Officials  of  the  American  Metal  Company 
deny  any  knowledge  of  this  scheme. 

Since  America  entered  the  war,  official  reports 
show,  there  has  been  no  misbehavior  by  the  Ameri- 
can Metal  Company.  As  much  cannot  be  said 
for  some  of  its  subsidiaries,  especially  in  Mexico, 
where  officials  have  been  most  active  in  the  anti- 


124  GERMANY'S  NEW  WAR 

American  propaganda  on  which  Germany  counted 
for  a  diversion. 


Big  Fight  Made  Against  Octopus 

Against  the  octopus  the  Allied  world  has  made 
a  vigorous  fight  and  has  scored  heavily.  Britain 
forced  the  breaking  of  all  the  Australian  zinc  con- 
tracts. France  and  Belgium  built  smelters.  Eng- 
land drove  Merton  &  Co.  into  liquidation  by 
refusing  to  give  it  a  license,  though  the  firm  could 
not  be  seized  since  all  the  owners  were  British 
subjects. 

In  America  also  heavy  blows  have  been  dealt  it. 
In  spite  of  fictitious  transfers  of  stock  into  Ameri- 
can names,  Beer,  Sondheimer  &  Co.,  and  L.  Vogel- 
stein  &  Co.  were  seized  by  the  Alien  Property  Cus- 
todian, as  were  the  German  shares  in  the  American 
Metal  Company.  The  first  concern  was  put  into 
liquidation.  In  the  case  of  the  second,  since  Vogel- 
stein  is  an  American  citizen,  and  since  it  has  been 
impossible  to  obtain  an  exact  accounting  from  Aron 
Hirsch  &  Sohn  as  to  the  interests  involved,  a  five- 
year  voting  trust,  with  Americans  in  control,  has 
been  arranged,  and  the  actual  control  of  the  busi- 
ness has  been  turned  back  to  Vogelstein. 


THE  METAL  OCTOPUS  125 

The  American  Metal  Company  was  more  com- 
plicated, but  this,  too,  has  been  put  under  Ameri- 
can control,  through  an  agreement  between  the 
American  shareholders  and  the  Alien  Property  Cus- 
todian, by  which  trustees  appointed  by  the  latter 
will  exercise  control  for  five  years. 

"The  German  metal  octopus,"  says  Mr.  Palmer, 
in  summing  up  the  result  of  these  operations,  "had 
spread  his  tentacles  across  the  ocean  and  over  the 
United  States  into  Mexico  and  South  America,  but 
for  the  present  surely,  and  for  all  time,  it  is  hoped, 
he  has  been  driven  back  and  a  wall  of  Americanism 
erected  which,  it  is  hoped,  he  will  never  be  able 
again  to  scale." 

Not  All  Believe  America  is  Safe 

Not  all  who  have  watched  the  fight  are  so  con- 
fident. Premier  W.  M.  Hughes,  of  Australia,  who 
had  a  struggle  against  the  octopus  at  home,  made 
the  following  remarks  in  a  speech  last  September. 
Some  of  the  things  which  he  criticizes  have  since 
changed,  but  his  attitude  remains  of  interest: 

The   Metallgesellschaft   in   America  had   ex- 
tended one  of  its  most  powerful  tentacles.     The 


126  GERMANY'S  NEW  WAR 

American  government  has  placed  these  concerns 
under  the  control  of  trustees,  but  this,  while  plac- 
ing the  present  control  in  the  hands  of  the  gov- 
ernment, in  no  way  affects  the  designs  of  the 
enemy.  It  does  not  change  the  German  octopus 
into  a  truly  American  institution.  If  the  Ameri- 
can government  does  no  more  than  it  has  done, 
when  the  war  is  over  the  trade  which  flowed 
formerly  down  these  alien  channels  will  again  re- 
sume its  normal  course.  American  labor  and 
American  capital  will  again  exert  themselves  for 
the  benefit  of  an  enemy  which  the  manhood  of 
America  has  sworn  to  destroy. 

It  is  not  by  changing  names  or  any  such  sur- 
face scratching  methods  that  we  can  destroy  the 
great  octopus.  Most  certainly  it  is  not  by  ap- 
pointing as  two  public  trustees,  as  has  been  done 
in  America,  the  very  men  who  were  the  original 
conspirators.  Of  course,  there  are  other  trustees 
who  are  bona  fide  American  citizens,  but  we  may 
be  quite  sure  that  Vogelstein  and  Hothorn,  who 
controlled  the  operations  of  the  business  for  Ger- 
many before,  will  continue  to  do  so.  Of  course, 
they  will  alter  their  methods,  cunningly  avoiding 
anything  calculated  to  arouse  comment  or  excite 
suspicion.  They  will  endeavor  to  persuade  the 
American  citizens  that  all  is  well,  that  German 
influence  is  dead,  but  if  nothing  further  is  done 
Beer,  Sondheimer  &  Co.,  A.  Hirsch  &  Co.  and 
the  American  Metal  Company  will  after  the  war, 
resume  the  place  in  America  which  they  occupied 
before  the  war  began. 


THE  METAL  OCTOPUS  127 

Garvan  Believes  Fears  Groundless 

Francis  P.  Garvan,  the  present  Alien  Property 
Custodian,  believes  Mr.  Hughes's  fears  are  ground- 
less, first  because  the  financial  control  of  these  con- 
cerns has  come  into  American  hands,  and  second, 
because,  as  will  be  explained  in  a  later  chapter,  he 
believes  that  the  German  agents,  once  forced  into 
line,  will  be  faithful.  But  apart  from  this,  he  be- 
lieves that  everything  the  existing  law  permits  has 
been  done. 

Meanwhile  the  German  home  concerns  have 
throughout  the  war  been  piling  up  profits  at  a  rate 
unprecedented,  even  in  their  own  history,  and  they 
are  to-day  far  more  powerful  than  when  the  war 
began.  Nowhere  has  any  measure  been  taken  to 
prevent  their  growing  again,  if  they  can  find  any 
man  who  will  take  the  money  they  are  able  to  offer, 
in  return  for  stock  in  these  and  similar/concerns. 


CHAPTER  X 
TEXTILES— A  COLONIZED  INVASION 

WOOLEN  MILLS  OWNED,  OFFICERED  AND  MANNED  BY 
GERMANS — THE  "WOOL  PLOT"  AND  ITS  BACKERS 

BLOCKING  THE  MANUFACTURE  OF  UNIFORMS 

MANY  OF   MEN  WHO  WERE  GERMAN  AGENTS 

STILL  IN  CONTROL 

ONE  of  the  most  completely  and  perfectly  in- 
trenched of  the  German  interests  in  America,  dis- 
covered when  the  Alien  Property  Custodian  began 
its  work,  was  that  in  the  great  textile  trade.  Here 
in  six  great  woolen  mills  and  five  smaller  concerns, 
in  two  big  lace  factories,  and  in  a  score  of  silk, 
velvet  and  other  businesses,  the  German  hand  was 
'found. 

The  textile  industry  is  of  particular  interest  be- 
cause of  its  close  dependence  upon  the  dye  business 
— which  until  the  war  was  almost  a  German 
monopoly  here.  The  combination  held  a  powerful 

128 


TEXTILES— A  COLONIZED  INVASION   129 

threat,  though  one  that  had  never  been  exercised, 
against  American  interests  along  the  same  line.  For 
the  dyers,  by  favoritism  of  any  kind — in  price,  in 
quality,  novelty  or  delivery  of  dyes,  could  put  any 
American  firm  against  which  an  attack  was  to  be 
directed,  under  a  frightful  handicap. 

The  Alien  Property  Custodian  has  used  the  full 
power  of  the  laws  at  his  disposal  to  eliminate  the 
German  power  here,  but  has  been  unable  so  far  to 
clean  the  industry  up  completely.  If  the  present 
status  should  become  fixed  when  peace  is  signed 
Germany  in  the  textile  mills  will  still  be  intrenched, 
not  indeed  with  more  than  a  fraction  of  her  former 
power,  but  still  strong  and  dangerous.  The  sale 
of  the  German  interest  in  one  great  mill,  the  Botany, 
has  been  held  up  by  a  suit.  In  a  group  of  mills 
the  same  naturalized  American  citizen  who  was 
representative  of  the  former  German  owners,  has 
bought  in  the  control. 

German  "Experts"  Honeycomb  Business 

But  especially,  throughout  the  industry,  the  pro- 
portion of  German  officials,  experts  and  workmen 
is  so  great,  and  the  task  of  replacing  them  with 
other  skilled  men  is  so  serious,  that  the  most  pa- 


130  GERMANY'S  NEW  WAR 

triotic  of  the  new  owners  will  find  it  a  long  time 
before  he  can  be  sure  that  he  controls  the  mills  he 
owns.  The  whole  industry  was  practically  a  Ger- 
man invading  colony. 

"These  mills  have  always  kept  their  distinctively 
German  organization,'1  the  Alien  Property  Custo- 
dian's report  says,  "both  as  to  executives  and  em- 
ployes. It  may  be  said  that  German  is  the  official 
language  of  the  workmen.  The  discipline  among 
the  employes  reflects  the  typical  military  spirit  of 
Germany/' 

In  spite  of  these  handicaps,  the  Alien  Property 
Custodian  has  succeeded  in  turning  these  German 
bought  spindles  and  looms  to  the  service  of  the 
American  army,  and  from  four  of  the  mills  alone 
the  output  of  war  material  has  totalled  above  $24,- 
000,000.  Also,  the  companies  have  subscribed  to 
more  than  $10,000,000  worth  of  Liberty  bonds, 
$500,000  to  the  Red  Cross  and  $300,000  to  the 
United  War  Work  Fund. 

German  Interests  Centered  at  Passaic 

The  German  textile  interests  centered  at  Passaic, 
N.  J.,  where  are  located  the  great  Botany  Worsted 
Mills  and  the  group  controlled  by  E.  W.  Weissflug, 


TEXTILES— A  COLONIZED  INVASION  131 

of  Gera,  Germany;  the  Gera  Mills  and  the  New 
Jersey  and  the  Passaic  Worsted  Spinning  com- 
panies. The  Botany  was  owned  by  the  Stoehr  in- 
terests, of  Leipzig,  Germany,  and  though  the  con- 
trol has  been  seized  by  the  Alien  Property  Custodian 
Max  Wilhelm  Stoehr,  a  naturalized  citizen,  the  son 
of  the  owner  and  a  previous  army  officer  detached 
from  the  German  front  and  sent  to  America  to 
handle,  in  191 5-' 16,  the  great  "wool  plot,"  has 
brought  suit  to  save  the  property. 

The  Botany  Mill  has  been  charged  from  the  be- 
ginning of  the  war  with  vigorous  pro-German  and 
often  unneutral,  if  not  anti- American,  activity. 
Chief  of  this  was  the  "wool  plot,"  by  which  the 
whole  American  industry  was,  for  Germany's  bene- 
fit, put  in  the  position  of  breaking  the  most  solemn 
pledges  and  the  cutting  off  of  the  whole  American 
supply  was  threatened. 

Broke  Faith  to  Help  Germany 

Great  Britain,  which  had  practical  control  of  the 
world's  wool  supply,  found  early  in  the  war  that 
considerable  quantities,  which  were  used  to  make 
uniforms  for  German  soldiers,  were  reaching  Ger- 
many. She  then  put  on  an  embargo  and  released 


132  GERMANY'S  NEW  WAR 

wool  to  America  only  on  pledges  that  none  of  it 
should  reach  Germany.  The  Textile  Alliance  was 
formed  to  see  that  these  pledges  were  kept. 

The  Germans,  under  Hugo  Schmidt  and  Stoehr, 
set  to  work  to  beat  the  game,  and  the  Botany  Mills 
and  the  Forstmann  &  Huffmann  Company  were 
used,  to  quote  one  of  Schmidt's  reports,  as  "shove- 
in-betweens."  Of  this  performance  an  official  re- 
port by  Deputy  Attorney  General  Becker  of  New 
York  says :  "Every  step  in  this  transaction,  from 
purchase  to  importation  and  release,  was  a  fraud 
on  the  Textile  Alliance  and  the  British  government 
and  a  violation  of  voluntarily  assumed  obligations." 

The  Textile  Alliance  itself,  after  an  investigation, 
reported  that: 

The  firm  had  attempted  to  mislead  the  alliance 
as  to  the  residence  and  citizenship  of  its  directors. 

That  by  false  representations  it  had  imported 
wool  from  Australia  and  then  refused  to  help 
straighten  out  the  shipping  tangle,  and  was  an- 
tagonistic, if  not  dishonest. 

That  it  had  shipped  quantities  of  wool  as 
waste,  in  violation  of  the  interstate  commerce 
act. 

That  its  imports  greatly  exceeded  its  needs, 
and  there  were  indications  that  it  was  accumu- 
lating a  supply  for  Germany  after  the  war. 

That  it  accepted  orders  from  the  United  States 


TEXTILES— A  COLONIZED  INVASION  133 

government  and  tried  to  get  wool  from  the  Brit- 
ish government  to  fill  those  orders,  saying  it  was 
necessary,  though  it  had  5,000  bales  of  wool  in 
stock  and  the  orders  called  for  only  1,600. 

In  return  for  this  the  Botany  got  a  shipment  of 
dyes  direct  on  the  submarine  Deutschland,  instead 
of  having  to  take  its  chances  with  other  mills  in 
buying  from  the  dye  concerns  which  received  the 
rest  of  the  shipment.  There  was  also  money  com- 
pensation. 


Workmen  Blocked  Army  Contracts 

So  firmly  intrenched  was  the  German  in  this  mill 
that  even  after  the  Alien  Property  Custodian  took 
charge  and  appointed  seven  of  the  eleven  directors, 
there  was  a  notable  falling  off  in  the  production 
of  the  mill.  One  investigator  reported  this  was 
nearly  a  60  per  cent  reduction  from  normal.  An- 
other reported  what  amounted  to  sabotage  on  gov- 
ernment contracts  from  German  executives  who 
had  remained  in  place.  A  third  said  that  the  execu- 
tives were  doing  their  best  to  make  conditions  such 
as  to  bring  about  a  strike.  It  was  months  before 
this  was  cleared  up. 

No  such  charges  have  been  made  against  the 


134  GERMANY'S  NEW  WAR 

Weissflug  group  of  mills,  and  the  Alien  Property 
office  attributes  this  to  Christian  Bahnsen,  who  was 
superintendent  of  the  three  mills,  as  representative 
of  the  German  owner.  Mr.  Bahnsen,  who  was  born 
in  Germany,  but  is  naturalized  and  has  a  son  in 
the  American  army,  bought  in  these  mills  at  the 
A.  P.  C.  sale. 


Other  Seizures  of  Textile  Mills 

Another  branch  of  the  textile  industry  in  which 
the  Germans  had  invested  heavily  was  that  of  lace- 
making.  The  Dresden  Lace  Works,  Inc.,  which 
was  chiefly  owned  by  the  Dresden  Gardinen  und 
Spitzcn  Manufactur  Actien  Gcsellscliaft,  and  was 
sold  to  one  of  the  stockholders,  Richard  Muller,  an 
American  citizen  of  German  birth,  who  was  the 
president,  on  condition  that  he  put  his  stock  into 
a  voting  trust,  under  Alien  Property  control,  for 
five  years. 

The  International  Textile,  Inc.,  another  lace  con- 
cern, has  also  been  partly  seized.  This  was  owned 
jointly  by  Max  and  Albert  Henkel,  together  with 
a  similar  concern  in  Langerfeld,  Germany.  The 
concern  originally  reported  that  there  was  no  enemy 


TEXTILES— A  COLONIZED  INVASION   135 

interest,  but  the  Alien  Property  Custodian  seized 
2,298  shares  after  an  investigation. 

Nineteen  other  textile  firms,  including  several 
dealing  in  cotton  waste,  and  others  making  silks, 
velvets,  etc.,  were  found  to  have  an  enemy  interest, 
which  has  been  seized  and  sold  at  auction  or  soon 
will  be. 

Thus  great  German  textile  interests  in  America, 
after  going  through  the  Alien  Property  Custodian's 
hands  and  being  disinfected  and  cleaned  up  so  far 
as  the  law  and  the  facts  in  the  case  permitted,  re- 
main practically  under  the  immediate  direction  of 
the  same  men  who,  about  two  years  ago,  were 
handling  them,  only  then  as  agents  of  German 
owners. 

Germany,  barred  from  the  wool  markets  of  the 
world  for  five  years  and  straining  to  recover  every- 
where her  position  in  world  trade,  as  a  base  for 
a  new  campaign  of  commercial  aggression,  can  be 
counted  on  to  try  soon  to  see  whether  these  former 
agents  of  her's  will  return  to  her  service,  at  a  price. 


CHAPTER  XI 
WEAPONS  THE  HUN  HAS  LOST 

POTASH    AND    ITS    LYING    PROPAGANDA AMERICA'S 

EFFORTS  TO  DEVELOP  OWN  SUPPLY — SUCCESS 
IN  SIGHT  BUT  IS  MENACED  BY  NEW  ATTACK — 
THE  ROMANCE  OF  OPTICAL  GLASS — U.  S.  CAN 
NOW  PROVIDE  OWN  SURGICAL  INSTRUMENTS 

THERE  are  three  industries,  in  which  the  coming 
of  the  war  found  the  Germans  completely  in- 
trenched in  America,  which  come  under  the  classi- 
fication of  the  "protective"  businesses  which  Her- 
zog  plans — and  Germany  is  preparing — to  use  as 
bludgeons  to  force  other  nations  into  commercial 
subjection. 

These  are  potash  as  fertilizers,  optical  glass  and 
surgical  instruments. 

Each  is  vital,  in  a  different  way.  In  each  Ger- 
many had  a  dominating  position,  if  not  an  actual 
monopoly,  when  the  war  broke. 

w 


WEAPONS  THE  HUN  HAS  LOST        137 

The  most  important  of  these  is  potash,  and  Ger- 
many is  particularly  counting  on  it  as  a  first  weapon 
in  her  war  of  business  aggression.  Potash  is  an 
exceedingly  valuable  fertilizer,  probably  a  vital  one, 
for  certain  American  soils.  It  is  true  that  there 
has  been  no  noticeable  loss  in  fertility  during  the 
potash  famine  since  the  war,  but  experts  agree  that 
the  soils  have  been  impoverished,  and  that  we  to- 
day need  not  only  our  normal  supply,  but  enough 
to  make  up  the  arrears  of  five  years  if  our  lands 
are  not  soon  to  show  serious  effects. 

When  the  war  broke  Germany  had  a  practical 
monopoly  on  commercial  potash.  Her  deposits 
were  of  the  kind  that  could  be  put  on  the  market 
most  cheaply,  and  she  has  made  the  most  of  them, 
killing  all  competition  and  reaping  enormous  profits. 
She  openly  counted  on  the  damage  she  could  do 
by  withholding  the  stuff  to  force  other  nations  to 
her  terms  after  the  war,  and  she  has  gathered  great 
quantities  of  it  to  be  used  in  her  characteristic 
ways  the  moment  the  blockade  is  lifted. 

Plans  to  Kill  American  Industry 

It  is  estimated  that  there  is  $100,000,000  worth 
ready  to  be  thrown  on  the  American  market  alone. 


138  GERMANY'S  NEW  WAR 

The  first  objective  would  be  to  kill  the  American 
potash  industry,  which  has  gnrwn  up  since  the  war, 
and  is  still  unable  to  meet  the  German  product  on 
equal  terms  as  to  price. 

The  German  potash  grip  on  America  was  won 
in  characteristic  manner.  First  there  was  the 
propaganda.  Germany's  high  reputation  in  the 
scientific  and  particularly  in  the  chemical  world 
enabled  her  to  put  out  a  mass  of  material  which 
was  accepted  as  gospel.  American  scientists  and 
agricultural  experts  took  up  the  campaign,  and 
there  are  suspicions  that  some  were  in  German  pay. 
The  main  points  made  by  the  propagandists  were 
the  great  need  of  potash,  the  wonderful  benefits  of 
potash,  and  the  alleged  impossibility  of  American 
production.  So  powerful  was  this  propaganda  that 
there  is  much  uncertainty  to-day  as  to  the  exact 
facts  in  the  case. 

Propaganda  to  Force  Potash  Sale 

The  center  of  the  potash  sale  and  propaganda 
in  America  was  the  German  Kali  Works,  Inc.,  a 
New  York  branch  of  the  great  Kalisyndikat,  G  M 
B  H,  of  Berlin.  Here  is  a  report  to  one  of  the 
government  intelligence  services  on  this  concern 
and  its  work: 


WEAPONS  THE  HUN  HAS  LOST        139 

The  German  potash  monopoly  has  always  been 
controlled  by  the  government,  and  for  a  long 
time  it  kept  a  very  large  and  expensive  branch 
in  America,  and  employed  a  large  and  expensive 
staff  of  lecturers,  demonstrators  and  agents,  who 
were  sent  to  grange  meetings  and  other  meetings 
of  farmers,  and  also  to  various  agricultural  col- 
leges for  the  purpose  of  propaganda. 

This  propaganda  had  a  twofold  purpose :  First, 
to  impress  on  the  agricultural  communities  that 
German  potash  was  the  one  indispensable  fer- 
tilizer, without  which  crop  failure  could  be  ex- 
pected, and,  second,  to  sow  the  seeds  of  Germanic 
kultur. 

There  can  be  no  doubt  that  it  was  highly  suc- 
cessful; so  much  so  that  when  the  British  block- 
ade shut  off  potash  from  Germany  many 
agricultural  publications  published  direful  fore- 
bodings (there  are  many  indications  that  some 
of  this  gloom  was  scientifically  inspired),  and  the 
German  government  repeatedly  referred  to  its 
potash  as  the  one  invaluable  asset  which  could  be 
used  in  dealing  with  neutrals  and  later  at  the 
peace  table. 

However,  if  there  has  been  any  crop  failure 
in  the  United  States  or  elsewhere  as  a  result 
of  the  failure  to  import  German  potash  the  fact 
has  escaped  the  press  of  America. 

It  is  worth  noting,  though,  that  even  after  the 
United  States  had  entered  the  war,  and  long 
after  the  Kali  company  had  ceased  to  do  busi- 
ness, its  principal  New  York  employes  were  put 
on  half  pay,  there  was  no  change  in  the  clerical 


140  GERMANY'S  NEW  WAR 

staff,  which  was  suspected  of  being  employed  in 
the  distribution  of  German  propaganda  not  of  a 
strictly  commercial  character. 

Propaganda  Has  Reappeared  Already 

The  German  potash  propaganda  has  already  re- 
appeared both  here  and  in  Germany.  Herzog 
classes  it  far  up  on  his  list  of  protective  industries. 
"Among  raw  materials,  the  most  important  will  be 
certain  salts  (potash)  necessary  in  agriculture/'  he 
says. 

The  German  potash  monopoly,  however,  is  one 
the  destruction  of  which  now  lies  in  American  and 
Allied  hands.  Dr.  J.  E.  Spurr,  of  the  Bureau  of 
Mines,  points  out  that  in  the  Saar  basin,  which  France 
is  seeking  under  the  peace  treaty,  are  potash  fields, 
still  undeveloped,  but  which  within  five  years  could 
very  nearly  supply  the  world.  Moreover,  in 
America  itself  there  has  been  a  considerable  de- 
velopment of  potash  production,  so  that  the  experts 
believe  that  safety  is  in  sight. 

The  American  supply  of  potash  is  low  grade,  and 
it  has  been  a  tremendous  problem  to  put  its  produc- 
tion on  a  commercial  basis.  This  process  has  now 
been  perfected,  but  only  partly  applied.  There  are 
also  being  developed  methods  of  saving  potash;  as 


WEAPONS  THE  HUN  HAS  LOST         141 

a  by-product  to  other  manufactures,  like  that  of 
cement. 

But  it  will  take  at  least  two  years  to  bring  the 
industry  to  a  point  where  it  can  meet  the  German 
prices,  and  nearly  five  before  it  can  supply  the 
whole  country.  The  Department  of  the  Interior 
has  asked  Congress  for  a  licensing  system  which 
will  give  the  industry  these  needed  years,  and  Dr. 
Spurr  declares  that  if  this  is  done  it  can  safely  be 
predicted  that  within  five  years  America  will  be 
able  to  supply  itself,  and  perhaps  even  to  under- 
sell Germany  in  the  world  market. 


Romance  in  Solving  of  Optical  Glass  Problem 

Optical  glass  of  the  highest  grade  is  another  vital 
need.  Without  it  high  grade  scientific  work  is  im- 
possible, and  in  war  time  it  was  found  tremendously 
difficult  to  get  lenses  for  gun  sights,  range  finders, 
periscopes  and  the  hundred  other  imperative  needs 
of  war.  Here  again  the  Germans,  operating  chiefly 
through  the  Goerz  American  Optical  Company,  had 
obtained  a  powerful  hold.  In  the  first  place,  they 
were  capable  of  producing  a  glass  that  was  finer 
and  clearer  than  any  made  in  America,  and  in  the 


142  GERMANY'S  NEW  WAR 

second,  they  had  protected  themselves  with  ap- 
proximately eighty  American  patents,  held  by  the 
German  concern,  and  revokable  at  its  option. 

In  this,  as  in  potash,  the  war  has  brought  relief. 
First,  the  Alien  Property  Custodian  seized  the  Goerz 
company,  and  the  patents  with  it,  and  has  sold  it 
to  an  American  purchaser,  who  cannot  be  ham- 
strung by  the  Germans.  But  even  more  important, 
in  many  ways,  was  the  accidental  discovery  of  a 
method  of  making  in  America  the  clearest  glass  in 
the  world,  which  was  one  of  the  everyday  romances 
of  the  war. 

This  discovery  came  in  the  manufacture  of 
phosgene,  the  deadly  gas  invented  in  America,  and 
prepared  by  the  ton  for  use  on  the  West  front. 
When  one  of  the  brick  retort-towers  in  which  the 
gas  was  made  was  torn  down,  it  was  found  that 
the  inside  of  the  bricks  had  been  perfectly  and 
wonderfully  bleached. 

In  due  time  the  news  of  this  reached  the  glass- 
makers,  and  experiments  showed  that  this  deadly 
stuff  was  the  most  powerful  bleaching  agent  the 
chemical  world  knew,  and  that  with  its  aid  almost 
any  kind  of  sand  could  be  made  into  perfect  glass. 
So  here,  again,  a  guard  against  German  competition 
during  the  period  when  the  industry  already  started 


WEAPONS  THE  HUN  HAS  LOST        143 

!s  getting  on  its  feet,  would  seem  to  be  all  that  is 
needed  to  insure  America. 


Can  Now  Make  Own  Surgical  Instruments 

There  is  no  need  of  emphasizing  the  importance 
of  the  best  surgical  instruments.  When  the  war 
began  the  American  trade  in  these  was  almost  en- 
tirely controlled  by  the  Kny-Scheerer  Corporation 
which,  Mr.  Palmer  reports,  after  its  false  state- 
ments had  been  sifted  and  the  facts  dug  up,  was 
found  to  be  a  branch  of  the  Actien  Gesellschaft  fur 
Fein  Mechanik,  camouflaged  to  have  the  appearance 
of  an  American  concern.  Its  hold  on  the  trade  was 
largely  due  to  patent  and  trademark  rights,  and 
only  partly  to  the  development  in  Germany  of  a 
technical  skill  on  the  part  of  the  workmen  which 
was  little  known  here. 

The  superiority  of  the  German  instruments  was 
generally  recognized.  Recently  a  surgeon  was 
asked  about  the  matter. 

"We  can  get  other  instruments,"  he  said.  "They 
are  two  or  three  times  as  hard  to  keep  in  condition. 
And  some  which  I  suppose  are  patented,  I  don't 
think  we  can  get  at  all.  Here  is  one,"  and  he 
showed  a  little  pair  of  drunken  looking  scissors, 


144  GERMANY'S  NEW  WAR 

"that  means  all  the  world  to  me,  and  I  don't  know 
what  I  can  do  when  it  wears  out." 

The  surgeon  may  be  comforted.  The  surgical 
instrument  situation,  also,  has  been  cleaned  up.  The 
Kny-Scheerer  Corporation,  patents,  trademarks 
and  all  has  been  taken  over.  The  putting  under 
American  control  of  the  Becker  Steel  Corporation, 
which  produces  the  high  speed  steel  needed  for  such 
instruments,  has  also  helped.  The  business  soon 
will  be  put  on  the  market  for  Americans  to  buy. 

"The  corporation  has  established  the  foremost 
place  in  surgical  instruments  in  this  country  and 
its  products  find  a  ready  market,"  Mr.  Palmer 
reports. 

"An  American  factory  has  been  established,  and 
with  the  protection  which  can  be  given  to  the  in- 
dustry by  my  seizure  of  the  German  trademarks 
and  patents,  there  is  no  reason  why  it  may  not 
compete  with  any  instrument  manufacturers  in  the 
world." 


CHAPTER  XII 
SHIPPING— A  THREE-EDGED  MENACE 

TREMENDOUS  POWER  USED   WITH   UTTER  DISREGARD 
OF   LAW    AND  DECENCY A    CENTER    FOR   BOMB 

PLOTS — DISCRIMINATION   AGAINST   AMERICA 

ESPIONAGE  A  PART   OF  ROUTINE  BUSINESS 

EFFORTS  TO  GET  US  INTO  WAR  WITH  BRITAIN 

THE  "BUNKER  LICENSE"  WEAPON 

Two  great  German  shipping  companies  and  five 
smaller  ones  had  fastened  on  America  when  the 
war  broke. 

Following  the  Kaiser's  precept  that  "the  future 
of  Germany  lies  on  the  sea,"  her  merchant  marine 
already  had  what  seemed  a  secure  hold  on  the 
American  end  of  the  great  ocean  lanes,  and  was 
fast  tightening  that  grip.  The  war  showed  how 
powerful  her  hold  was,  and  with  what  utter  dis- 
regard of  law  and  decency  she  used  it.  The  worst 
of  the  bomb  plots,  the  espionage  and  the  murder 

145 


146  GERMANY'S  NEW  WAR 

and  arson  conspiracies  were  hatched  around  the 
German  ship  companies.  They  broke  our  neutrality 
in  every  conceivable  way,  sought  to  involve  us  in 
the  war  against  the  Allies,  furnished  supplies  to 
German  raiders,  and  finally,  after  we  were  in  the 
war,  attempted  to  aid  the  sea-snakes  that  were  sink- 
ing American  ships  in  American  waters. 

In  the  German  war  of  exploitation  their  power 
was  not  less  great,  nor  less  used.  Their  rates,  of 
course,  had  to  meet  the  competition  of  all  other 
shipping,  and  the  tribute  we  paid  them  was  the 
same  that  America  has  paid  other  maritime  nations 
for  decades  rather  than  carry  her  own  sea  tonnage. 
But  the  German  had  other  methods. 

There  was  discrimination  in  freights  from  this 
side.  A  man  favored  by  the  great  German  machine 
found  his  bills  less.  The  American  exporter  was 
thus  discriminated  against. 

There  was  worse  discrimination  on  the  freight 
rates  on  goods  coming  here.  The  German  govern- 
ment, with  its  control  over  shipping  as  well  as  over 
its  railways,  used  the  freight  rates  to  offset  the 
trade  barriers  which  had  been  provided  by  Con- 
gress. If  a  tariff  was  raised  the  freight  rate 
dropped,  and  the  German  product  came  on  the 
American  market  at  a  price  which  evaded  the  pro- 


SHIPPING— A  THREE-EDGED  MENACE    147 

tection  this  country  had  tried  to  give  its  own 
producers.  When  there  was  one  of  the  frequent 
German  "dumping"  campaigns  on,  the  shipping 
companies  were  expected  to  help  batter  down  the 
American  firms  by  laying  the  dumped  goods  down 
cheaply. 

Espionage  Part  of  Ship  Companies'  Work 

Always  there  was  espionage — the  German  com- 
panies, from  their  manifests,  were  able  to  report 
to  the  great  central  commercial  information  bureau, 
where  German  exporters  could  make  use  of  the 
information,  what  Americans  were  shipping,  to 
whom  and  how  much.  Every  shipment  became  a 
tip  for  a  German  commercial  traveler  in  some  dis- 
tant part  of  the  world. 

The  control  of  shipping,  and  the  use  of  it,  became 
a  vital  part  of  the  German  commercial  army  as 
soon  as  the  system  of  overproduction,  "dumping" 
as  a  trade  weapon,  and  the  drive  for  a  commercial 
"Deutschland  Uber  Alles"  became  established.  It 
was  one  of  the  best  of  her  trade  weapons. 
Throughout  the  war  she  has  nursed  it  carefully. 
Shipbuilding  has  gone  on  in  Germany  when  there 
was  an  actual  shortage  of  men  and  materials  for 


148  GERMANY'S  NEW  WAR 

munitions.  More  than  that,  she  has  sold  ship- 
building material  to  the  neighboring  neutrals,  no 
matter  what  her  own  straits,  on  conditions  that 
gave  her  the  control  of  their  ships  after  the  war. 

"We  shall  inevitably  draw  the  conclusion  that 
the  power  of  expansion  of  the  new  Germany  is  in 
large  measure  due  to  the  organization  and  activity 
of  her  transport  system,"  says  Professor  Henri 
Hausef,  whose  book,  "Germany's  Commercial  Grip 
on  the  World,"  is  the  standard  work  on  that 
subject. 

"The  intervention  of  the  German  ship  by  the  side 
of  the  German  railway  reveals  to  us  another  means 
of  German  commercial  penetration — the  combined 
rate.  It  is  somewhat  difficult  to  be  exactly  in- 
formed about  these  combined  sea-and-rail  rates, 
which  Germans  consider  one  of  the  secrets  of  their 
power.  What  is  known  is  that,  by  means  of  a 
single  consignment  note,  one  is  able  to  send  goods 
from  certain  German  stations  to  certain  stations 
abroad,  by  a  determined  port,  at  a  single  and  very 
reduced  charge  which  includes  land  carriage,  sea 
freight  and  handling  costs." 


SHIPPING— A  THREE-EDGED  MENACE    149 

Immense  Growth  of  Merchant  Marine 

The  German  merchant  marine  grew  from 
640,000  tons — a  month's  U-boat  sinking — in  1870 
to  5,000,000  tons  in  1914.  In  1909,  the  last  year 
for  which  figures  are  available,  there  cleared  from 
German  ports,  under  the  German  flag,  nearly  65,000 
vessels,  totalling  13,000,000  tons.  Forty  per  cent 
of  the  German  ships  were  concentrated  under  the 
Hamburg-American  and  the  North  German  Lloyd 
companies  and  these  headed  a  secret  cartel  which 
included  many  of  the  secondary  companies.  The 
Hamburg-American  Line  alone  operated  sixty-eight 
lines  of  steamers,  touching  all  American  ports  and 
crossing  the  Pacific. 

The  Germans  had  a  special  advantage  as  regards 
America.  When  the  LaFollette  law  passed  it  ap- 
plied to  all  ships  touching  American  ports  condi- 
tions which  improved  the  lot  of  the  seamen,  but 
were  onerous  on  the  owners.  The  Germans 
avoided  this  by  a  very  simple  expedient — the  entire 
crews  of  their  ships  were  put  under  naval  law  as 
reserves.  Any  chance  that  they  would  leave  ship 
in  New  York,  or  join  any  activity  for  higher  wages 
or  better  conditions,  vanished. 

The  Germans,  also,  shipping  men  report,  were 


150  GERMANY'S  NEW  WAR 

as  quick  to  break  their  commercial  treaties  as  their 
government  was  to  smash  its  political  ones.  They 
are  credited  with  the  failure  of  the  transatlantic 
pool,  a  shipping  agreement  to  control  rates  and  sail- 
ings, through  their  constant  attempts  to  break  the 
agreements  whenever  they  saw  any  advantage  to 
themselves  in  doing  so. 

Became  a  Part  of  Huns'  War  Machine 

This  was  the  nature  of  the  tentacle  that  had 
fastened  on  our  ports.  When  the  war  came  it 
showed  itself  wholly  German.  It  was  put  under 
the  direction  of  Dr.  Albert  and  Hugo  Schmidt,  the 
Kaiser's  agents,  and  (to  consider  only  its  shipping 
activities)  became  immediately  active  in  attempting 
to  supply  German  raiders,  contrary  to  law.  Ac- 
counts submitted  before  the  Overman  Committee, 
which  investigated  German  activities,  showed  that 
more  than  a  dozen  ships,  and  several  million  dol- 
lars, had  been  used  in  these  attempts.  Few  of 
them  succeeded. 

Helped  Keep  Alive  Wooden  Ship  Dispute 

A  side  light  on  the  wooden  ship  controversy,  and 
the  German  interest  in  preventing  America  from 


SHIPPING— A  THREE-EDGED  MENACE    151 

building  a  permanent  merchant  marine,  shows  the 
Teutonic  hand.  During  the  long  controversy  be- 
tween General  Goethals  and  Chairman  Denman 
practically  no  correspondence  reached  the  Shipping 
Board  from  indignant  or  advisory  citizens.  But 
the  moment  that  controversy  was  ended  the 
"country"  was  heard  from  and  the  board's  mail 
was  rilled  with  demands  that  the  wooden  ships  be 
built.  The  number  of  German  names  was  amaz- 
ing, but  not  one  of  the  writers  pointed  out  that 
wooden  ships  would  be  worthless  for  after-the-war 
trade  purposes. 

The  work  done  by  the  Alien  Property  Custodian 
and  the  new  powers  which  have  been  developed  by 
the  Transportation  Bureau  of  the  War  Trade 
Board,  and  will  remain  in  the  American  defensive 
arsenal  when  that  organization  disbands,  have  con- 
vinced the  officials  that  the  German  merchant 
marine  threat  is  over  for  the  time  being,  even  if 
the  Allies  permit  her  to  keep  any  ships. 

The  Alien  Property  Custodian  has  seized  the 
great  piers  and  terminals  of  the  North  German 
Lloyd  and  the  Hamburg-American  line  in  New 
York  harbor.  He  has  also  seized  and  sold,  or  will 
sell,  the  Brynhilda  Shipping  Corporation  (camou- 
%ged  as  Scandinavian),  the  Cargo  Transportation 


l 


152  GERMANY'S  NEW  WAR 

Corporation,  the  Lutz  Shipping  Company,  the 
Seguranca  Steamship  Company  and  the  Vogeman 
Shipping  Company.  In  most  of  these  the  enemy 
interest  was  100  per  cent. 

Until  new  piers  are  found  in  New  York  the 
German  companies  can  come  here  only  on  suffer- 
ance and  for  the  present,  at  least,  the  destruction 
of  the  German  sea  octopus,  so  far  as  America  is 
concerned,  is  believed  to  be  complete. 

New  Weapon  Ready  Against  German  Ships 

The  War  Trade  Board  has  developed,  moreover, 
a  weapon  which  can  be  used  indefinitely  to  prevent 
this  octopus  getting  a  new  grip.  This  is  the  so- 
called  "bunker  license"  which,  under  the  law  as 
administered  during  the  war,  includes  also  every 
sort  of  ship  supply.  By  it  any  ship  can  be  pre- 
vented from  carrying  from  any  American  port  any 
commodity  whatever,  even  if  that  commodity  was 
brought  in  by  the  same  ship.  This  is,  of  course, 
an  extreme  power  and  not  likely  to  be  invoked, 
but  it  remains  as  a  possibility  in  case  the  new  Ger- 
man attack  becomes  a  serious  danger  along  this 
line. 

There   is  much  talk  in  England  of  putting  a 


SHIPPING— A  THREE-EDGED  MENACE    153 

bunker  license  system  into  effect,  leaving  it  without 
teeth  until  needed,  but  handy  to  use  if  necessary  in 
forcing  out  the  Germans.  If  America  and  Britain 
should  join  to  enforce  such  a  policy  no  German  ship 
could  get  past  Suez,  Panama  or  the  Kameruns  and 
none  could  touch  at  any  port  in  the  United  States, 
Great  Britain  or  a  British  colony. 


CHAPTER  XIII 
INSURANCE— ESPIONAGE  AT  A  PROFIT 

MILLIONS  A  YEAR  PAID  BY  AMERICANS  TO  GERMANS 
WHO  BETRAYED  THEIR  SECRETS — THE  NEUTRAL 
CAMOUFLAGE  AGAIN — PLAN  FOR  GREAT  SECRET 

TRUST EVEN     GOVERNMENT     LET     HUN     SPIES 

LEARN       FACTS       BY       INSURING       TRANSPORTS 
AGAINST  U-BOATS 

Before  the  war  Germany  and  Austria-Hungary 
had  made  great  progress  in  the  matter  of  insur- 
ance, not  only  in  their  own  countries  but  in  the 
whole  world.  They  had  made  a  specialty  of  re- 
insurance, and  had  established  forty-seven  large 
companies  exclusively  for  reinsurance,  which 
made  large  profits  in  Great  Britain,  France, 
Italy,  etc. 

They  had  gained  this  remarkable  position  (a) 
by  their  perfect  organization;  (b)  by  their  sys- 
tem of  commercial  spying;  (c)  by  controlling 
and  financing  companies  pretending  to  be  Italian, 
Russian,  etc.,  and  (d)  by  their  system  of  appoint- 
ing as  agents  of  their  reinsurance  companies  the 
sons  and  sons-in-law  of  the  directors  of  the  in- 
154 


INSURANCE— ESPIONAGE  AT  A  PROFIT    155 

surance  companies  of  France,  Belgium,  etc. 
Their  system  of  companies  devoted  solely  to  re- 
insurance gave  them  a  basic  knowledge  of  the 
trade  movements  of  other  countries  and  particu- 
lars of  almost  every  commercial  transaction  in 
the  world;  the  name  of  the  merchant,  the  name 
of  the  buyer,  the  price,  the  class  of  goods  and  the 
destination.  A  few  days  later  all  this  informa- 
tion was  tabulated  in  Berlin." 

This  is  the  summary  approved  by  the  Commercial 
Committee  of  the  British  House  of  Commons  on 
the  German  insurance  system.  Every  word  of  it, 
as  the  investigations  of  the  Alien  Property  Cus- 
todian show,  was  true  of  America. 

Insurance,  and  especially  reinsurance,  as  organ- 
ized by  the  German,  was  a  system  that  made  the 
countries  where  the  Hun  had  established  himself 
pay  a  handsome  profit  for  being  spied  upon. 
America  was  very  thoroughly  spied  upon  and 
America  paid  the  Germans  a  profit  of  millions  a 
year  on  their  system,  receiving  in  return  insurance 
that  in  case  of  a  strain  would  have  proved  almost 
worthless. 

No  Protection  Against  Renewed  Spying 

This  system,  thanks  to  the  work  of  the  Alien 
Property  Custodian,  has  been  broken  up  and  the 


156  GERMANY'S  NEW  WAR 

companies  the  Germans  had  here  are  being  liqui- 
dated. But  no  measures  have  been  taken  which 
would  prevent  the  immediate  reappearance  in  Amer- 
ican business  of  this  branch  of  the  German  spy  sys- 
tem and  no  measures,  except  the  precautions  of  in- 
dividual insurers,  are  possible  under  the  present  law. 

The  Germans'  reinsurance  scheme  is  another  in- 
stance of  the  keenness  of  their  commercial  strategy. 
When  big  risks  are  to  be  taken,  usually  any  running 
over  $100,000,  it  is  customary  to  divide  them  among 
several  companies,  so  that  in  case  of  loss  no  one 
will  be  hit  too  hard.  The  Germans  made  a  specialty 
of  the  companies  which  should  take  up  parts  of 
such  risks — usually  rather  small  parts — and  which 
thus  received  all  the  information  on  which  the 
original  policy  had  been  issued. 

By  this  and  other  means  the  German  companies 
in  America  were  able  to: 


Know  the  cargo,  destination,  value,  shippers, 
consignors  and  destinations  of  almost  every  ship 
that  left  an  American  port,  even  after  this  coun- 
try entered  the  war.  This  went  so  far  that  Ger- 
man companies  were  carrying  insurance  against 
U-boat  attacks  on  ships  sailing  for  the  American 
government,  and  received  as  a  routine  matter  in- 
formation which  the  American  newspapers  were 
not  permitted  to  publish. 


INSURANCE— ESPIONAGE  AT  A  PROFIT    157 

Know  the  plans,  conditions  and  state  of  activity 
in  many  of  the  great  industrial  plants  of  the 
country,  including  some  government  munitions 
plants. 

Ship  gold  to  South  America  to  finance  German 
propaganda  there  after  this  country  entered  the 
war,  and  at  a  time  when  no  one  else  was  able  to 
do  this. 

Insure  the  heavy  shipments  of  foodstuffs  and 
other  goods  which  were  being  made  with  the  hope 
that  they  would  reach  Germany,  and  if  they 
were  seized  by  the  British,  appear  as  Americans 
and  prosecute  claims  for  recovery  before  the  Brit- 
ish prize  courts.  Several  times  they  recovered 
their  money. 

Entered  Many  Fields  of  American  Activity 

The  wide  activities  of  the  German  insurance  com- 
panies are  revealed  by  the  list  of  things  the  Alien 
Property  Custodian  has  taken  over  from  them. 
These  include  death  claims  under  life  insurance 
policies,  matured  endowment  policies  and  annuity 
contracts,  employers'  liability  and  workmen's  com- 
pensation claims  and  "group  policies,"  claims  under 
marine  insurance  contracts  of  various  kinds,  claims 
under  fire,  accident  and  casualty  insurance  policies, 
and  a  variety  of  small  claims. 

The  power  of  the  German  companies  in  this  coun- 
try was  amazing,  as  well  as  widespread,  and  a 


158  GERMANY'S  NEW  WAR 

grandiose  scheme  for  extending  that  power  and 
intrenching  it  behind  American  incorporation  and 
American  names  was  undertaken  while  the  war  was 
going  on.  Eighteen  German  concerns  and  agencies 
in  this  country  have  been  seized  and  are  being  liqui- 
dated— a  most  difficult  process  which  it  will  take 
some  five  years  to  complete — and  since  there  were 
so  many  German  companies  camouflaged  under 
neutral  and  American  names  their  remains  at  least 
a  doubt  whether  the  entire  field  has  been  swept  quite 
clean. 

The  insurance  carried  by  the  German  companies 
in  America  four  months  after  we  entered  the  war 
was  estimated  by  Senator  Frelinghuysen,  of  New 
Jersey,  at  $2,000,000,000,  when  he  attempted  to 
prevent  the  Senate  from  putting  the  German  com- 
panies out  of  business  on  the  ground  that  it  would 
disrupt  the  whole  American  insurance  situation. 

The  Southern  Insurance  Journal  in  1917  made  a 
compilation  showing  that  in  ten  years  the  annual  in- 
comes of  the  German  companies  had  grown  from 
$14,193,235  to  $53,494,740  in  1916,  and  that  they 
had  absorbed  in  those  ten  years  a  total  of  $296,- 
616,931  of  American  money.  Even  as  late  as  last 
fall,  when  the  Alien  Property  Custodian  was  clos- 
ing out  the  business  of  the  eighteen  companies  he 


INSURANCE— ESPIONAGE  AT  A  PROFIT    159 

was  able  to  seize,  he  found  a  premium  income  of 
$14,680,005. 

Low  Reserve  Made  Insurance  Almost  Worthless 

Against  this  tremendous  business,  with  the  won- 
derful insight  it  gave  into  American  commerce  of 
all  kinds,  the  Germans  carried  a  flimsy  and  almost 
worthless  reserve.  A  high  authority  in  Washington 
declared  shortly  after  we  entered  the  war  that  of 
the  assets  to  which  the  American  insurers  must 
look  for  making  good  their  claims  $62,000,000  of 
the  $68,000,000  required  were  invested  in  German 
government  bonds.  Further,  he  said,  the  German 
companies  kept  in  America  a  reserve  of  only  about 
47  cents  against  each  $1,000  of  insurance,  or  about 
one-tenth  of  what  the  American  companies  carry. 
So  that  the  man  insuring  with  the  German  concerns 
was  paying  Germany  a  good  price  for  telling  his 
secrets  to  the  German  government  and  getting 
almost  worthless  insurance  in  return.  Ask  the  San 
Franciscans  who  had  money  in  German  companies 
when  the  fire  swept  that  city ! 

In  all  this,  of  course,  the  majority  of  those  buy- 
ing such  insurance  were  patriotic  Americans,  de- 
ceived by  the  German  camouflage.  The  Germans 
had  incorporated  many  of  their  companies  under 


160  GERMANY'S  NEW  WAR 

American  names  even  before  the  war,  and  con- 
tinued their  business  under  the  direction  of  Ameri- 
can firm  names  and  American  agents  after  we 
entered  the  conflict. 

German  Control  Found  Under  New  Camouflage 

One  of  the  most  notable  instances  of  this  was  the 
case  of  F.  Hermann  &  Co.  and  O.  G.  Orr  &  Co. 
Hermann  dealt  largely  in  marine  reinsurance,  and, 
of  course,  went  "out  of  business"  under  the  Presi- 
dent's proclamation.  O.  G.  Orr  and  others  of  his 
partners  organized  the  new  firm  of  O.  G.  Orr  &  Co. 
and  announced  that  they  had  cleared  out  the  Ger- 
man influences  entirely. 

According  to  testimony  given  before  the  Over- 
man committee,  the  Orr  firm  remained  closely  con- 
nected with  the  German  insurance  pool,  paid  its 
profits  to  Hermann  through  excessive  salaries  to 
its  officers,  which  they  turned  over,  and  in  general 
acted  under  Hermann's  direction.  It  took  over  all 
the  business  of  the  Hermann  firm.  In  a  file  in  the 
Orr  offices  there  was  discovered  a  letter  from  the 
Mannheimer  Versicherungs  Gesellschaft  referring 
to  the  German  insurance  pool  as  if  Orr  knew  all 
about  it,  though  he  had  written  to  the  War  Trade 
Board  that  "until  the  American  insurance  pool  was 


INSURANCE— ESPIONAGE  AT  A  PROFIT    161 

referred  to  by  Mr.  B ,  of  the  War  Trade  Board, 

early  in  June,  1917,  we  never  heard  of  such  an  or- 
ganization/' There  was  also  found  a  letter  in- 
structing Orr  to  transfer  $100,000  from  the  Mann- 
heimer  account  at  a  big  Broadway  trust  company 
to  the  account  of  the  Reichsbank. 

The  camouflage  of  American  ownership  was  fre- 
quent. In  one  instance  it  was  found  that  every 
share  of  stock  in  an  "American"  company  was  Ger- 
man owned,  except  those  necessary  for  the  directors 
to  qualify,  and  that  the  Germans  had  an  option  on 
these  shares.  In  the  case  of  American  agencies  of 
German  companies  attempts  were  frequently  de- 
tected to  hide  the  funds  due  the  Germans,  in  hope 
of  sending  them  over  after  the  war. 


Plan  for  Great  Underground  Trust 

The  German  insurance  pool  was  one  of  the  most 
ambitious  schemes  undertaken  during  the  war.  It 
was  originally  formed  to  insure  shipments  of  goods 
intended  for  Germany,  as  has  been  described,  but 
it  developed  into  a  scheme  to  unite  all  the  German 
insurance  companies  of  America,  and  to  continue 
them  after  the  war  as  a  great  underground  trust. 
This  scheme  was  fully  under  the  control  of  Hugo 


162  GERMANY'S  NEW  WAR 

Schmidt    and    Dr.    Albert,    open    agents    of    the 
Kaiser. 

So  close  was  the  German  government  control 
that  Albert  gave  directions  for  advertising  the 
Hermann  firm  in  South  American  papers  and  prom- 
ised support  for  the  handling  of  marine  insurance 
"to  any  amount."  In  a  letter  to  Schmidt  he  advised 
that  he  could  promise  that  in  cases  where  it  was  de- 
sirable he  could  make  it  appear  that  the  insurance 
was  being  taken  by  other  than  German  companies, 
and  added  that  Hermann  had  perfected  arrange- 
ments whereby  policies  could  be  issued  by  American 
companies,  which  would  then  be  covered  by  reinsur- 
ing the  risks  with  German  companies  whose  names 
would  not  appear. 

Germans  Insured  Against  Own  U-Boats 

The  Insurance  Pool  contract  provided  for  the  in- 
suring against  capture  of  cargoes  bound  for  Europe 
from  all  American  ports  of  all  war  goods  as  well 
as  sea-risk  insurance,  and  provided  for  the  pool- 
ing and  distribution  of  the  risks  and  profits.  It 
provided : 

Paragraph   2. — Issuing   companies:      Into   the 
pools   flow   all   sums   turned   over    for   policies 


INSURANCE—ESPIONAGE  AT  A  PROFIT    163 

issued  under  the  terms  of  the  agreement  by  the 
common  agency  of  the  Mannheimer  Ver- 
sicherunge  Gesellschaft  and  the  Nord-Deutsche 
Versicherunge  Gesellschaft  of  New  York.  These 
offices  will  hereinafter  be  designated  as  the  issu- 
ing companies. 

Paragraph  8 — Guarantee:  The  Deutsche 
Seeversicherunge  Gesellschaft  of  1914,  and  all  the 
companies  forming  the  pool,  undertake  absolutely 
all  the  obligations  of  the  policies  of  the  issuing 
companies.  They  agree  in  advance  to  all  cus- 
tomary clauses  and  conditions  of  the  original 
policy  as  well  as  such  as  arise  out  of  the  cir- 
cumstances and  obligate  themselves  to  pay  their 
share  of  all  damages,  advances,  costs,  etc. 

Paragraph  15 — Duration  of  the  pool:  The 
pool  goes  into  effect  on  September  I,  1915, 
and  all  business  reported  from  New  York 
on  and  after  that  date  falls  into  the  pool.  The 
pool  shall  continue  for  the  duration  of  the  pres- 
ent war.  At  the  end  of  the  war  any  party  to  the 
pool  may  sever  his  connection  by  giving  four 
weeks'  notice. 

Paragraph  33 — Receiving  companies:  The 
sum  total  of  the  insurance  flowing  into  the  pool 
is  turned  over  to  the  Deutsche  Seeversicherunge 
Gesellschaft  of  1914  to  be  distributed  among  the 
receiving  companies  at  the  percentage  assumed 
by  them. 

Had  No  Insurance  on  the  "Lusitania" 
The  close  care  which  the  German  government 


164  GERMANY'S  NEW  WAR 

took  of  these  companies  is  shown  by  the  fact  that 
they  lost  practically  nothing  on  the  Lusitania. 

The  early  efforts  to  clean  up  this  German 
system  were  not  effective,  as  the  German  concerns 
simply  got  behind  American  names  and  continued 
their  espionage  as  usual,  seeing  the  manifests  of 
ships  and  the  plans  of  the  munition  plants  the  gov- 
ernment was  building.  It  was  not  until  the  Alien 
Property  Custodian  began  work  that  they  were  really 
crippled.  They  have  now  practically  disappeared  as 
a  factor  in  the  American  insurance  world. 

There  is  nothing  to  prevent  their  return  as  soon 
as  Americans  will  do  business  with  them  again,  or 
as  soon  as  they  buy  into  American  companies  under 
cover. 


CHAPTER  XIV 
THE  GATHERING  ASSAULT  ON  AMERICA 

ATTACK    ALREADY    GOING    ON — METHODS    INCLUDE 
PROPAGANDA,  ESPIONAGE,  "DUMPING,"  SECRECY, 

TREACHERY       AND       DECEIT MUCH       GERMAN 

PROPERTY    COULD    NOT   BE    SEIZED TREACHERY 

AND  WEAKNESS  AMONG  AMERICANS OFFICIALS 

POINT  OUT  DANGER — REAL  DEFENSE   MUST  DE- 
PEND  ON   AMERICAN    BUSINESS   MEN 

DR.  S.  HERZOG,  the  prophet  of  the  New  Prus- 
sian Piracy,  lays  down  among  others  these  rules 
for  tricking  the  world: 

The  reopening  of  export  relationships  with 
once  hostile  countries  must  take  place  through 
neutrals,  instead  of  through  direct  representa- 
tives, as  in  the  past. 

Neutral  trading  journals  represent  an  effective 
means  for  promoting  the  German  manufacturing 
export  trade. 

The  denationalization  of  goods  should  not  be 
avoided. 

165 


166  GERMANY'S  NEW  WAR 

German  exporters  must  expect  that,  for  a  long 
time  after  the  war,  German  exports  will  be  out- 
lawed among  our  present  enemies.  .  .  .  The  in- 
trinsic quality  of  exported  goods  must  be  typically 
German;  their  external  garb,  for  better  or  for 
worse,  will  have  to  be  anonymous — neutral. 

Germany's  new  attack  on  America  is  going  on 
to-day.  Her  advance  guards  are  on  the  ground  and 
behind  them  are  massed  the  forces  of  the  nation, 
ready  for  the  new  commercial  conquest,  new  trade 
exploitation,  new  aggression.  Their  motto  is 
"Subjugate  America  First." 

The  menace  is  forcibly  stated  by  A.  Mitchell 
Palmer,  now  Attorney  General  and  lately  Alien 
Property  Custodian,  in  his  report  on  the  work  of 
that  office,  which  has  been  in  closest  contact  with 
the  Hun  invaders.  He  says: 

I  do  not  want  to  continue  the  war  after  the 
war.  I  am  for  peace.  I  believe  that  the  great 
overshadowing  result  which  has  come  from  this 
war  is  the  assurance  of  peace  almost  everlasting 
among  the  peoples  of  this  earth. 

I  would  help  to  make  that  an  absolute  cer- 
tainty by  refusing  to  permit  Germany  to  prose- 
cute a  war  after  the  war. 

The  military  arm  of  her  war  machine  has  been 
palsied  by  the  tremendous  hammering  of  the 
Allied  powers.  But  her  territory  was  not  in- 


GATHERING  ASSAULT  ON  AMERICA    167 

vaded,  and  if  she  can  get  out  of  the  war  with 
her  home  territory  intact,  rebuild  a  stable  gov- 
ernment, and  still  have  her  foreign  markets 
subject  to  her  exploitation,  by  means  no  less  foul 
and  unfair  than  those  which  she  has  employed 
on  the  field  of  battle,  we  shall  not  be  safe  from 
future  onslaughts  different  in  methods,  but  with 
the  same  purpose  that  moved  her  on  that  fateful 
day  in  July  when  she  set  out  to  conquer  the  world. 


Must  Dislodge  Hun  Within  Our  Gates 

"I  have  already  referred  to  the  importance  and 
necessity  of  dislodging  the  hostile  Hun  within  our 
gates,  whose  methods  are  such  as  to  unsettle  the 
future  peace  of  the  world,"  he  says  again.  And 
he  reports  that  the  fight  has  started. 

"With  the  cessation  of  hostilities  something  of 
a  new  fighting  spirit  has  developed,"  he  reports, 
"and  lawyers  who,  while  the  war  was  on,  would 
have  been  unwilling  to  play  any  part  in  resisting 
the  just  demands  of  the  government  in  taking 
enemy  property  have  not  hesitated  to  throw  all 
sorts  of  obstacles  in  the  path  of  the  Alien  Property 
Custodian." 

His  evidence  does  not  stand  alone.  The  spread 
of  a  new  propaganda,  the  appearance  of  German 
agents  all  over  the  country,  the  appointment  of  high 


168  GERMANY'S  NEW  WAR 

officials  in  Germany  because  of  their  familiarity 
with  America,  the  diplomatic  attitude  and  commer- 
cial preparations  of  the  whole  German  fabric,  all 
prove  the  same  thing.  The  main  outline  of  the 
German  campaign,  IN  AMERICA,  is  already  com- 
ing into  plain  view.  With  a  startling  accuracy  it 
follows  the  lines  laid  down  by  Herzog,  the  commer- 
cial Treitschke. 

Country  is  Full  of  Propaganda 

First — PROPAGANDA.  The  country  is  full  of  it, 
often  unrecognized.  We  are  told  that  the  German 
is  a  good  fellow  after  all,  that  we  must  have  his 
products,  that  we  must  give  him  a  chance  to  live 
and  pay  indemnities,  that  we  must  not  "lay  up  seeds 
of  hate,"  that  we  really  like  him  better  than  the 
French  and  British,  that  he  has  never  hated  us; 
that,  in  short,  we  ought  to  take  him  back  on  the 
old  basis,  or  better. 

"The  propaganda,"  says  Herzog,  "is  to  be 
carried  out  in  increased  measure  even  in  a  differ- 
ent form  from  before,  a  form  which  will  not  irri- 
tate the  feelings  of  past  enemies — a  form  which 
takes  these  feelings  into  account  in  determining 
future  activity.  .  .  .  Dollar-and-cent  policies  get 
the  last  word  after  all,  as  is  to  be  seen  in  many 


GATHERING  ASSAULT  ON  AMERICA    169 

cases  even  in  war — often  against  the  interests 
of  one's  own  country — and  much  more  often  in 
peace." 

Germany  Has  Big  Army  in  America 

Second — ESPIONAGE.  The  country  is  full  to-day 
of  German  agents;  it  has  never  been  cleared  of 
them.  Captain  George  B.  Lester,  of  the  Military 
Intelligence  Division,  testified  before  the  Overman 
Committee  that  there  was  a  silent  army  of  more 
than  200,000  persons  registered  at  the  German  and 
Austrian  consulates,  ready  to  give  their  services, 
usually  without  pay,  to  the  enemies  of  America. 
That  army  has  never  been  disbanded.  Some  of  its 
members  were  driven  away — they  are  beginning  to 
reappear.  Some  were  interned — they  will  soon  be 
released.  A  few  of  the  worst  were  imprisoned,  but 
even  they  will  practically  all  be  freed  within  two 
years. 

Men  who  were  on  that  list  permeate  our  business 
life.  They  are  agents  and  executives  for  our  fac- 
tories and  traders.  They  are  confidential  account- 
ants and  experts.  They  have  their  fingers  on  every 
pulse.  Legally,  they  cannot  be  touched,  but  there 
they  are. 

"German    industries"    says    Hersog,    "must 


170  GERMANY'S  NEW  WAR 

therefore  be  constantly  informed.  .  .  .  It  is  self- 
evident  that  for  this  purpose  the  industrial 
federation  .  .  .  will  devote  special  care  to  making 
private  connections  which  have  a  deeper  insight 
into  the  special  conditions  of  each  case." 


Ready  to  Start  Dumping  Campaign 

Third — DUMPING.  Dumping  has  long  been  a 
scientifically  controlled  weapon  of  commercial  ag- 
gression in  Germany.  It  has  been  used  to  crush 
out  foreign  competition. 

During  the  war  America  has  developed  a  dye 
industry  that  shortly  bids  fair  to  rival  and  defeat 
Germany's,  and  America  also  has  under  way  the 
development  of  a  potash  production  that  will  de- 
stroy the  German  monopoly.  Germany  has  been 
counting  on  these  two  industries  to  be  her  most 
powerful  weapons  against  the  world,  and  their  use- 
fulness will  be  gone  to  her — they  will  become  simply 
profitable  forms  of  business — if  the  American  in- 
dustries remain  in  existence. 

Germany  will  therefore  dump  into  the  American 
market,  at  any  kind  of  a  price,  dyestuffs  and  potash, 
and  she  will  keep  dumping,  throwing  in  the  whole 
resources  of  the  national  treasury  to  cover  the  loss, 
until  the  unsupported  American  industries  can 


GATHERING  ASSAULT  ON  AMERICA    171 

stand  the  strain  no  longer.  Then  will  -Germany 
recover  her  great  weapons — and  America  will  pay 
the  indemnities  for  the  trade  war. 

"This  protection  of  Germany's  export  trade" 
says  Herzog,  "will  be  permanent  and  effectual 
only  if  the  weapons  of  protection  (tliat  is,  the 
indispensable  industries)  remain  exclusively  in 
the  possession  of  German  manufacture.  .  .  .  Noth- 
ing stands  in  the  way  of  the  fulfilment  of  this 
condition  provided  that  the  war-forged  watch- 
word, 'Our  country  first  of  all/  retains,  in  peace 
times  alsof  the  same  importance  and  general 
recognition  which  it  now  commands. 

"Among  raw  materials,  the  most  important  will 
be  certain  salts  necessary  in  agriculture.  .  .  . 

"The  classification  of  finished  products  will  be 
somewliat  more  difficult,  since,  with  few  excep- 
tions the  dependency  of  foreign  countries  upon 
them  is  not  always  easy  to  prove.  In  these  ex- 
ceptions are  included,  briefly,  certain  dyestuffs 
and  chemicals  of  an  industrial  and  pharmaceu- 
tical nature." 

Secrecy  to  Mark  Huns'  Aggression 

Fourth — SECRECY.  The  German  goods  will  come 
under  other  trademarks  and  names.  The  German 
agents  will  appear  as  of  other  nationalities.  Plans 
for  this  have  been  carefully  made  and  are  already 
in  full  operation.  The  most  astute  purchaser  will 


172  GERMANY'S  NEW  WAR 

often  be  deceived,  and  it  will  more  than  often  be 
difficult  to  detect  the  hand  of  the  Hun  behind  ap- 
parently advantageous  proposals  and  offers. 

"In  the  immediate  future"  says  Herzog,  "the 
presence  of  anything  German  among  formerly 
hostile  nations  will  evoke  emotions  which  are  not 
advantageous  for  the  advancement  of  commer- 
cial relationships.  Of  this  there  can  be  no  doubt. 
Germans  will  certainly  be  more  careful  than  ever 
not  to  give  offense.  But  in  this  they  will  be  suc- 
cessful only  if  they  take  as  a  pattern  the  Swiss 
method  in  linguistics.  Men  in  manufacture  and 
industry  must  take  care  in  future  to  use  foreign 
language  in  the  native  way.  .  .  .  We  need  not 
fear  that  Germanism  will  suffer  because  of  this. 

"A  foreign  exterior  is  necessary  for  purposes 
of  protection.  .  .  .  German  efficiency  must  link 
itself  with  a  conformability  not  hitherto  exer- 
cised. .  .  .  Denationalisation  of  goods  should  not 
be  avoided.  .  .  .  The  intrinsic  quality  of  exported 
goods  must  be  typically  German;  their  external 
garbt  for  better  or  for  worse,  will  have  to  be 
anonymous — neutral." 

Germans  Always  Working  Together 

Fifth — MUTUAL  AID.  The  'German  invaders, 
often  if  not  always  camouflaged,  will  always  be 
found  working  together  against  the  American  busi- 
ness man  and  buyer,  their  maneuvers  controlled 


GATHERING  ASSAULT  ON  AMERICA    173 

from  Berlin,  their  joint  efforts  being  centered  on 
a  maiY  or  a  business,  which  is  often  unaware  of 
attack,  and  still  less  often  aware  that  he  is  between 
two  hostile  forces,  which  are  cooperating  against 
him. 

Organizations  to  assure  this  have  already  reached 
tremendous  proportions  in  Germany,  and  the  con- 
solidation is  still  going  on,  with  every  indication 
that  it  will  not  cease  till  every  German  exporter 
has  been  brought  inside  a  single  great  cartel,  which 
will  control  all  their  outside  activities. 


"What  we  need"  says  Herzog,  "is  a  safe- 
guarding of  industry,  as  a  whole,  against  the 
special  interests  of  individual  industries,  which 
could  only  be  satisfied,  to  the  detriment  of  in- 
dustry in  general,  and  therewith  the  whole  ex- 
port trade.  .  .  . 

"War  conditions  have  caused  organizations  for 
the  purchase,  sale  and  distribution  of  material 
to  spring  up  in  our  economic  life,  the  possibility 
of  whose  formation  every  one  would  have 
doubted  before  the  war — economic  organisations 
with  formerly  unthinkable  authority,  and  oper- 
ating, perhaps  for  this  very  reason,  with  shining 
success.  Smooth  off  their  rough  edges  and  you 
can  easily  imagine  similar  bodies  in  time  of 
peace" 


174  GERMANY'S  NEW  WAR 

Bad  Faith  and  Bribery  to  Be  Used 

Sixth — BAD  FAITH.  Germany  taught  us  what  a 
"scrap  of  paper"  is.  In  commerce,  as  well,  her 
merchants  are  notorious  for  their  failure  to  keep 
their  agreements.  American  business  men  already 
know  that  a  German's  word  is  as  good  as  his  bond 
— it  requires  full  security  to  make  either  worth 
anything.  Germany  will  count  her  willingness  to 
break  faith  as  an  asset  in  her  new  war.  as  she  did 
in  the  old. 

"Commercial  treaties  will  come  again''  says  Her- 
zog,  "like  other  international  agreements,  and  prob- 
ably will  be  broken  again.  They  must  be  couched 
in  such  terms  that  they  bring  advantages  to  the 
export  trade  as  long  as  they  are  kept,  and  do  not 
threaten  its  existence  wlien,  for  a  little  variety, 
they  are  arbitrarily  abrogated" 

Seventh — BRIBERY.  Any  American  who  has  any- 
thing for  sale  which  the  Germans  want  can  get  his 
price.  Bribery  has  always  been  a  Prussian  weapon. 
The  chief  clerk,  the  confidential  employee,  the 
private  secretary  who  has  information,  can  always 
find  a  market  with  the  Hun  agents. 


GATHERING  ASSAULT  ON  AMERICA    175 

Eighth — UNITED  BUYING.  Already  before  the 
war  the  German  organization  succeeded  in  buying 
its  copper  from  America  at  a  price  that  averaged 
5  to  10  per  cent  lower  than  Americans  themselves 
had  to  pay.  The  German  organizations  are 
strengthened  for  this  now.  By  joining  hands  and 
placing  tremendous  orders  they  will  seek  to  cut 
under  the  American  market. 

Banks  Behind  All  Invading  Companies 

Jinth — BANKING  SUPPORT.  The  German  banks 
have  long  made  it  a  practice  to  stand  behind  her 
traders  in  a  way  which  is  not  done  by  any  other 
country  in  the  world.  They  speculate  on  the  suc- 
cess of  the  business  to  which  they  make  loans,  and 
they  are  assured  of  the  whole  power  of  the  German 
banking  system,  and  of  the  nation  behind  it,  to 
make  each  individual  speculation  good,  or  to  dis- 
tribute the  losses  if  it  finally  fails.  The  German 
invader  will  come  with  a  backing  such  as  no  Ameri- 
can business  man  can  ever  hope  to  get.  This  was 
just  beginning  to  work  in  America  when  the  war 
broke.  A  new  start  is  being  made. 

Tenth — RECOVERY  OF  HER  STRATEGIC  SITUATION 
IN  AMERICA.  The  war  found  Germany  with  a 


176  GERMANY'S  NEW  WAR 

powerful,  well  coordinated  army  of  invasion  well 
intrenched  in  this  country.  The  intrenchments  have 
largely  been  destroyed.  Germany's  first  desire  is  to 
get  them  back. 

Throughout  the  process  of  seizure  and  sale  of 
her  investments  here  the  German  has  been  fighting 
hard,  by  every  known  means.  Charges  have  been 
made  that  he  had  attempted  to  bribe  government 
agents  to  make  arrangements  whereby  he  could  get 
his  companies  back  after  the  war.  He  has  had  a 
bidder  at  almost  every  sale,  and  the  most  unremit- 
ting vigilance  has  been  necessary  to  prevent  the 
companies  going  back  immediately  into  camouflaged 
German  hands.  Since  the  armistice  these  efforts 
have  been  redoubled,  and  the  law  under  which  the 
seizures  were  made  has  been  attacked  at  every  point 
— by  "American"  lawyers 

Kaiser  Tried  to  Save  Invaders  Here 

So  vital  were  these  American  investments  to  the 
Germans  that  when  the  seizures  began  they  sent 
an  unprecedented  note  of  protest  to  the  State  De- 
partment. In  this  they  said : 

The    condition    put    upon    the    dispossession, 
which  is  left  to  the  discretion  of  the  President, 


GATHERING  ASSAULT  ON  AMERICA    177 

that  it  shall  be  necessary  for  the  national  security 
and  defense,  cannot  be  accepted  as  a  valid  ground 
for  such  rule,  since  the  above  stated  ground  can 
always  justify  a  seizure  for  use  during  war,  but 
not  a  lasting  acquisition  of  the  property.  .  .  . 
The  German  government  must  see  therein  an  at- 
tempt ...  to  shackle,  through  measures  of 
force,  the  opportunities  of  German  interests  in 
the  future  .  .  .  consciously  aimed  to  do  lasting 
injury  to  German  economic  existence. 

The  recovery  of  these  interests  will  be  sought  in 
every  way — through  law  suits,  through  attempts  to 
repurchase,  both  openly  and  secretly,  and  through 
the  use  of  such  German  agents  as  still  remain  inside 
the  seized  organizations — and  there  are  many  who 
are  at  least  under  suspicion — to  undermine  them 
from  the  inside. 

Huns  Still  Have  Vast  Resources 

To  back  up  her  campaign  Germany  still  has  vast 
resources  outside  her  own  territory.  Her  policy  of 
secrecy  and  the  elaborate  camouflage  under  which 
she  has  worked  make  it  impossible  to  do  more  than 
guess  at  the  figures.  Those  given  are  such  a  guess, 
concurred  in  by  several  men  who  have  been  in  close 
touch  with  the  matter,  and  are  as  of  the  beginning 
of  the  war. 


178  GERMANY'S  NEW  WAR 

Since  that  time  there  has  been  a  heavy  seizure 
in  Allied  countries,  much  injury  done  in  neutral 
countries  by  the  blockade,  the  trading  with  the 
enemy  lists,  and  similar  measures,  and,  on  the  other 
hand,  a  considerably  increased  German  investment 
in  neutral  countries  and  in  Russia.  Whatever  it 
now  amounts  to,  this  sum  is  out  of  reach  of  the 
measures  taken  by  the  peace  conference  to  put  Ger- 
man home  wealth  under  control,  and  will  be  avail- 
able for  financing  her  new  war. 

These  are  the  figures:  The  United  States,  two 
billion  dollars;  South  America,  two  billions;  Great 
Britain,  one  billion,  Europe,  two  and  one-half  bil- 
lions, and  Africa  and  Asia,  a  billion  and  one-half* 
making  a  total  of  nine  billions. 

No  Legislation  Yet  to  Meet  New  Menace 

Against  this  gathering  menace  America  can  set 
no  measures  for  defense  that  have  been  taken,  no 
preparedness  that  is  ready,  except  what  has  been 
done  by  the  Alien  Property  Custodian.  This  is 
much.  Many  measures  have  been  suggested,  some 
have  been  prepared.  Opportunities  for  defense  or 
for  counter  attack  are  on  every  hand.  But  there 
has  been  laid  before  Congress  no  comprehensive 


GATHERING  ASSAULT  ON  AMERICA    179 

plan,  nor  has  one  been  offered,  and  the  protection 
now  given  by  the  great  war  boards  is  vanishing 
as  they  fall  to  pieces.  Indeed,  they  were  never 
built,  and  they  have  not  the  powers,  to  give  such 
protection. 

One  thing  has  been  done,  not  indeed  for  the 
protection  of  America,  but  for  the  benefit  of 
American  trade,  and  that  is  the  great  damage  in- 
flicted on  the  German  machine  in  South  America 
through  the  efforts  of  the  intelligence  division  of 
the  War  Trade  Board.  Its  weapon  has  been  the 
use  of  the  enemy  trading  list  for  the  control  of 
exports  and  shipping  which  the  export  and  bunker 
license  power  gives,  and  with  this  it  has  forced  into 
liquidation  many  German  interests  in  South 
America,  and  has  driven  others  to  expensive  and 
crippling  subterfuges. 

Heavy  Seizure  of  Huns'  Property  Here 

The  chief  work  done  has  been  that  of  the  United 
States  Alien  Property  Custodian,  under  A.  Mitchell 
Palmer  and  Francis  P.  Garvan,  his  successor.  They 
have  taken  over  about  38,000  separate  enemy 
properties,  each  of  which  is  administered  as  a 
separate  trust.  The  book  value  of  these  trusts  on 


180  GERMANY'S  NEW  WAR 

February  15,  1919,  was  $502,945,72475,  but  there 
were  some  9,000  trusts  as  to  which  no  estimate  of 
value  had  been  possible,  and  in  the  case  of  many 
others  the  real  value  will  depend  on  the  price  real- 
ized at  the  sale,  so  that  the  total  amount  will  be  not 
less  than  $700,000,000  and  may  run  as  high  as 
$1,000,000,000. 

Mr.  Garvan  believes  that  the  custodian's  office  is 
now  within  measurable  distance  of  completing  the 
task  of  rinding  and  seizing  enemy  property — the 
job  of  administering  and  disposing  of  it  will  last 
for  many  months.  Some  parts  of  the  country  have 
been  swept  clear  already  of  practically  all  that  can 
be  seized  under  the  law,  and  a  minute  search  of 
other  sections  is  going  forward  rapidly.  New 
York,  which  was,  of  course,  the  chief  center  of 
enemy  investment,  is  practically  clean,  and  prob- 
ably by  the  time  this  book  is  published  the  bulk  of 
this  work  will  be  over. 

Indications  of  new  enemy  properties  are  still 
coming  in,  but  most  of  these  now  involve  only  small 
amounts,  of  little  importance  from  the  point  of  view 
of  commercial  strategy.  Under  the  law,  too,  those 
which  have  not  been  reported,  and  may  still  be  dis- 
covered, will  be  subject  to  seizure  for  failure  to 
report,  even  after  the  signing  of  peace. 


GATHERING  ASSAULT  ON  AMERICA   181 

German  Papers  Gave  Best  Clews 

As  has  happened  so  often,  the  Germans  them- 
selves gave  the  best  of  assistance  in  seeking  out 
these  properties.  German  organization  demands 
that  the  central  authority  shall  know  all  that  is 
going  on,  and  throughout  the  war  the  American 
investments  and  companies  were  continually  report- 
ing to  the  home  offices.  Since  November,  1916, 
when  the  government  took  over  the  Sayville  wire- 
less plants,  most  of  the  messages  have  passed 
through  the  hands  of  the  naval  censors  at  Sayville 
and  copies  of  all  these  messages  have  been  kept. 
There  are  270,000  of  them. 

Mr.  Garvan  had  these  messages  assorted  and 
searched,  and  he  then  began  investigations  on  the 
strength  of  the  information  unearthed  and  the  rela- 
tions shown  between  American  companies  and 
Berlin.  One  big  concern  was  seized,  for  instance, 
following  an  inquiry  started  because  it  had  con- 
sulted a  Berlin  person  about  some  raises  in  salary, 
though  on  the  surface  it  was  purely  American.  Mr. 
Garvan  feels  confident  that  there  were  few  German 
concerns  here  which  did  not  consult  their  German 
owners  at  some  time  during  the  American  control 
of  the  wireless,  and  he  has  got  hold  of  all  that  did. 


182  GERMANY'S  NEW  WAR 

Other  Hun  Firms  Driven  Underground 

Those  concerns  which  have  not  been  taken  over 
have  been  driven  so  far  underground  that  they 
have  been  put  to  great  expense  and  badly  crippled, 
and  they  will  have  to  stay  there  or  be  seized  when 
they  come  out.  In  the  meantime,  in  the  strategic 
industries  at  least,  American  companies  have  had 
time  to  get  a  fair  start,  and,  with  proper  protection 
through  the  next  critical  years,  should  be  able  to 
meet  German  competition  with  more  than  an  even 
chance  of  success. 

Furthermore,  some  thousands  of  patents  owned 
by  the  enemy  and  bearing  royalties  have  been  seized 
and  sold  to  Americans,  or  will  be  so  sold.  These 
form  a  double  protection — they  enable  the  Ameri- 
can owner  to  manufacture  here  the  article  which 
had  previously  been  imported  from  Germany,  or 
made  under  German  supervision  in  this  country, 
and  they  also  form  a  protection  against  German 
imports  of  that  article,  which  would  infringe  that 
patent.  Not  all  the  German-owned  patents  have 
been  discovered,  it  is  likely — the  United  States 
Patent  Office  grants  approximately  35,000  patents 
a  year — but  enough  has  been  done  to  give  the 
American  business  man  a  great  advantage.  Against 


GATHERING  ASSAULT  ON  AMERICA    183 

this  must  be  set  off  the  loss  of  American  patents  in 
Germany. 

Much  Property  Could  Not  Be  Seized 

But  the  law  has  not  permitted  a  clean  sweep  by 
the  Alien  Property  Custodian.  In  the  first  place, 
he  has  been  unable  to  touch  the  property  of  a  Ger- 
man subject  who  happened  to  be  resident  in 
America  and  who  behaved  himself  well  enough  so 
that  he  was  not  interned  as  "dangerous."  There  is 
considerable  property  of  this  kind,  and  in  one  or 
two  cases  "dangerous'*  enemies  have  sought  to 
evade  the  seizure  by  sudden  transfers  of  property 
to  wives  or  daughters  who  were  quite  harmless. 
These  are  among  the  cases  still  in  the  courts. 

In  the  second  place,  it  has  been  impossible  to 
locate  the  amount  of  German  money  invested  in 
certain  securities.  There  are  millions  of  dollars 
worth  of  stocks  and  bonds  on  which  no  dividends 
have  been  called  for  since  the  war  began,  and  they 
are  supposed  to  belong  to  enemies.  But  supposi- 
tion does  not  permit  the  seizure  of  these  millions. 

Finally,  there  are  some  cases  in  which  the  trans- 
fers made  by  Germans  to  save  their  property  come 
so  close  to  being  legal  that  suits  have  been  necessary 


184  GERMANY'S  NEW  WAR 

to  determine  whether  they  will  finally  escape  or  not. 
Here  is  such  a  case:  A  naturalized  American  and 
his  German  brother-in-law  had  heavy  joint  interests 
in  certain  companies  in  the  same  line  of  business, 
both  in  Germany  and  America.  In  no  case  did  they 
have  actual  control,  though  they  were  the  domina- 
ting influence  so  long  as  they  stood  together. 

Traded  Stocks  to  Avoid  Seizure 

When  the  war  became  imminent,  they  agreed 
that,  should  it  come,  they  would  simply  trade  in- 
terests, the  German  getting  all  the  American's  in- 
terests in  the  German  companies,  and  vice  versa. 
An  audit  was  to  be  made  and  the  balance  paid  in 
cash.  This  was  done,  and  the  American  duly  re- 
ported to  the  Alien  Property  Custodian  that  he 
owed  his  German  brother-in-law  $15,000,  which  he 
turned  over.  The  agreement  provided  that  each 
should  have  an  option  to  call  for  a  restoration  of 
the  original  status  at  any  time  within  five  years 
after  the  war,  and  so  far  this  option  of  the  German 
against  the  American  seems  to  be  about  all  that 
the  A.  P.  C.  can  seize.  The  amount  involved  is 
several  hundred  thousand  dollars. 

There  have  also  been  a  good  many  cases  where 


GATHERING  ASSAULT  ON  AMERICA    185 

from  one  reason  or  another  the  men  who  were  act- 
ing as  German  agents  in  charge  of  companies  here 
remain  in  charge  of  them  since  their  "Americaniza- 
tion." These  include  some  of  the  biggest  in  the 
country,  and  many  men  have  a  lingering  suspicion 
that  when  the  war  is  over  they  will  be  found  work- 
ing for  their  old  masters.  Mr.  Garvan,  however, 
who  knows  them  all  personally,  is  optimistic  on  this 
score. 

"You  mustn't  be  too  hard  on  those  men,  at  least 
some  of  them/'  he  said.  "Some  of  them  were 
working  to  free  themselves  from  the  German  con- 
trol for  years  before  the  war,  and  are  glad  of  the 
chance  to  get  free.  For  a  good  many  others  it  is 
plain  that  in  future  their  interests  lie  with  America. 
But  in  general  you  can  safely  count  that  they  will 
be  faithful  servants  of  their  new  masters,  as  they 
were  of  their  old  ones.  The  German  is  good  at 
taking  orders,  and  he  is  more  or  less  of  a  coward. 
They  are  in  a  position  where  they  will  suffer  if 
they  do  not  behave,  and  that  is  the  best  security 
you  can  have.  Anyway,  the  law  has  not  permitted 
us  to  do  more  than  we  have  about  them." 


186  GERMANY'S  NEW  WAR 

Two  Weapons  in  American  Hands 

Aside  from  the  limitations  which  may  be  put  on 
German  commercial  aggression  by  the  peace  con- 
ference, or  which  already  have  been  placed  on  it 
by  the  Allied  terms  and  by  the  circumstances  grow- 
ing out  of  the  war,  only  two  possibilities  so  far 
have  been  suggested  in  the  way  of  purely  American 
defense.  The  first  is  the  revision  of  the  tariff  with 
a  distinct  view  to  meeting  the  German  menace.  The 
second  is  the  transfer  to  peace  uses  of  the  commer- 
cial weapon  which  has  grown  out  of  the  war — the 
import  license. 

Great  Britain  already  is  using  this  last  named 
weapon  as  a  protection  for  her  industries  not  only 
against  German  competition  but  against  all  the 
world.  Under  this  system  she  absolutely  controls 
all  imports,  whether  of  manufactures  or  raw  ma- 
terials, and  assures  that  there  will  not  enough  of 
either  come  in  to  prevent  the  full  production  of 
her  own  factories,  mines  or  farms,  or  to  undercut 
the  prices  necessary  for  their  prosperity.  Inci- 
dentally she  prevents  the  importation  of  luxuries 
which  might  drain  off  money  needed  for  other  pur- 
poses, but  that  is  more  or  less  a  side  issue. 

It  has  been  suggested  that  such  a  system  be  in- 


GATHERING  ASSAULT  ON  AMERICA    187 

troduced  to  protect  America,  and  on  its  behalf  is 
urged  that  it  does  not  give  the  home  manufacturers 
or  other  producers  the  same  opportunity  to  raise 
prices  that  a  tariff  wall  does.  One  such  measure, 
designed  to  give  the  American  potash  production 
time  to  develop,  already  has  been  introduced  in 
Congress,  and  another  to  do  the  same  for  the  dye 
and  chemical  industry  is  being  prepared  and  will  be 
submitted  by  the  Chemical  Foundation. 

Personal  Watchfulness  the  Real  Defense 

Beyond  all  this,  however,  will  have  to  come  a 
constant  watchfulness  and  patriotism  on  the  part 
of  all  Americans. 

Unless  they  realize  that  a  war  is  going  on  the 
German  will  be  able  to  work  in  his  opening  wedges 
in  many  places. 

Unless  they  are  on  the  watch  for  propaganda 
they  will  succumb  to  much  of  it. 

Unless  they  are  willing  to  make  sacrifices  in  tem- 
porary price  advantages,  and  understand  that  those 
sacrifices  will  be  to  their  own  advantage  in  the  long 
run  by  keeping  the  American  producers  in  the  field, 
and  preventing  the  Germans  from  recovering  and 
exploiting  a  monopoly,  a  few  years  will  find  the 
Hun  exacting  a  heavy  toll  from  us. 


188  GERMANY'S  NEW  WAR 

Finally,  unless  there  is  a  careful  preparation 
made,  if  another  war  should  come,  we  would  find 
the  German,  as  in  this  one,  in  control  of  many 
of  our  most  essential  war  industries,  and  able  to 
cripple  us  beyond  estimate. 

U.  S.  Officials  Point  Out  Danger 

The  whole  problem  is  summed  up,  and  the  danger 
clearly  stated,  in  a  report  prepared  by  one  of  the 
officials  of  the  War  Trade  Board.  In  conclusion 
it  says: 

"After  considering  the  German  pre-war  achieve- 
ments in  the  economic  field  as  evidenced  by  her 
comprehensive  system,  centrally  controlled;  not- 
ing with  pride  the  laudable  achievements  of  the 
Allies  in  exposing  the  system  and  holding  it  in 
check  as  a  war  measure ;  perceiving  the  ambitious 
post-bellum  trade  plans  of  Germany  and  her  ag- 
gressive measures  even  in  the  midst  of  conflict 
to  counteract  Allied  activities  and  rehabilitate 
that  system,  and  viewing  with  apprehension  the 
apparent  failure  of  the  Allies  to  press  their  ad- 
vantages with  the  ruthlessness  characteristic  of 
their  enemies,  we  ask :  "After  the  war  what  is  to 
happen  in  the  fields  of  trade?" 

All  these  questions  affecting  trade  are  funda- 
mental. They  must  be  decided  at  the  peace  table, 
and  if  there  is  a  mistake  in  that  decision  then 


GATHERING  ASSAULT  ON  AMERICA    189 

we  do  not  now  experience  peace,  but  only  a  truce. 
Let  every  patriotic  American  ponder  these 
questions : 

Is  the  revolution  in  Germany  a  great  bluff? 
If  not,  will  the  training,  sentiments  and  tradi- 
tions of  generations  prevail  over  it  in  the  re- 
establishment  of  the  old  order.  Are  not  the 
wildly  enthusiastic  celebrations  in  Berlin,  wel- 
coming as  victors  not  only  the  returning  soldiers 
but  also  their  officers — exponents  of  the  old 
order — ominously  prophetic  ? 

In  any  event  are  the  great  business  interests 
still,  organized  on  the  old  imperialistic  basis, 
strong  and  cohesive  enough  to  support  the  pre- 
war system?  These  interests  were  represented 
in  the  original  armistice  commission  by  Mathias 
Erzberger.  Are  they  playing  a  Machiavellian 
role  and  is  their  hand  behind  the  present  disorder 
in  the  selfish  hope  that  they  may  survive  the 
storm  ? 

This  report  was  written  shortly  after  the  signing 
of  the  armistice.  The  questions  asked  have  now 
been  answered. 


Duty  Rests  on  American  Business  Men 

"There  is  no  reason  to  believe,"  says  a  report 
by  the  Department  of  Commerce  prepared  by 
Chauncey  Depew  Snow,  "that  the  insensate  aspira- 
tions for  dominating  the  labor  and  commerce  of 


190  GERMANY'S  NEW  WAR 

the  world  are  entirely  of  the  past.     In  fact,  there 
is  every  reason  to  believe  the  contrary. 

"There  is  a  clear  duty  resting  upon  American 
business  men  individually  to  keep  their  eyes  open 
to  German  competition  in  whatever  form  it  may 
come.  They  must  see  to  it  that  all  operations  of 
German  enterprises  shall  take  place  in  the  open  and 
bear  a  clear  indication  of  having  been  'made  in 
Germany/ ' 


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